AMAG Austria Metall AG (AMAG) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Q1 2025 Results Conference Call. I am Valentina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The forecast, plans, and forward-looking assessments and statements contained in this presentation were made on the basis of the all information available to AMAG up to April 25, 2025. The economic and trade policy environment has changed several times in recent weeks. Internal calculations and results analysis are based on various assumptions. This includes the unchanged validity of global U.S. import tariffs on aluminum products. If the assumptions on which the forecasts are based do not materialize, targets are not met or risk occur, actual earnings may differ from those currently anticipated. We assume no obligation to revise such forecasts in light of new information or future events. This presentation has been prepared and the data checked with the greatest possible care. However, rounding transmissions, or printing errors cannot be ruled out. In particular, AMAG and its representatives accept no liability for the completeness and accuracy of the information contained in this presentation. This presentation is also available in German. In case of doubt, the German version shall prevail. This presentation does not constitute a recommendation or invitation to buy or sell securities of AMAG. At this time, it's my pleasure to hand over to Christoph Gabriel, Head of Investor Relations. Please go ahead.

Good morning, ladies and gentlemen, and welcome to our conference call for the first quarter of 2025 of AMAG Austria Metall AG. Today, Helmut Kaufmann, CEO of AMAG; and Claudia Trampitsch, CFO of AMAG, will present the development and results of the first 3 months of this year. As usual, the presentation, as well as the press release have been published this morning on our homepage under Investor Relations. After the presentation, you have the opportunity to ask questions during the Q&A session. Helmut, please start the presentation. Thank you.

Good morning, ladies and gentlemen, also from my side. I would like to start with the highlights, Slide #3. And I'm glad to say that, we can present good quarterly figures despite the fact that the U.S. customs policy already cast some first shadows on the business. The Q1 '25, AMAG benefited from volume increases, especially in the Rolling Division and higher aluminum prices and premiums in the Metal Division, compared to last year. The revenues grew by around 20% to EUR 401 million, again due to price and volume factors. Last year, we achieved EUR 335 million. EBITDA increased by around 9% to EUR 46.1 million, compared to EUR 42.4 million last year. Net income after taxes reached EUR 16.2 million, and was around 22% higher than the first quarter of last year. Cash flow from operating activities was at a level of EUR 51.1 million and therefore, around 40% higher than EUR 35.6 million last year. So it's still early in the year, but we prepared a first look. And we can say that, the Q1 this year was still insignificantly affected by the U.S. tariffs, which were introduced at the 12th of March 2025, but this changes over the year. And increasing negative effects will become apparent starting from Q2 onwards. So from today's perspective, a full year EBITDA of EUR 110 million to EUR 140 million is the range that we published now. Let us move on to market and shipment information. And as usual, we start presented on Slide #5, with the Purchasing Managers' Index, which again shows that our most important markets, the Eurozone, U.K., but also North America, still mostly in the reddish area up maybe slightly improving compared to December of last year. So there are only a few exemptions where there are more positive signals. The Eurozone, however, continues to be the weakest area for industrial activities. And we feel uncertainty now coming up also in the United States. Looking at Slide #6, we present here the total shipments of the AMAG Group, which increased by 6% compared to last year's first quarter and reached in total 110,800 tonnes. How did this develop in the various segments? So Metal segment, our Canadian smelter, Alouette, produced as stable as we are used to and the shipments of primary aluminum increased by 1,400 tonnes compared to last year. Also in the Casting Division, where we produce and sell recycling foundry alloys increased by 400 tonnes. And the Rolling Division grew, especially in industrial applications and in packaging products, and was therefore able to compensate the decreases in aerospace, other transportation sectors and heat exchangers. The increase compared to last year was 4,800 tonnes. So how did these numbers split to the various sectors of rolled products use is introduced to you on Slide #7. You can see automotive industry is 19% of our shipments and compared to last year, 400 tonnes more. Aerospace, minus 300 tonnes. Other transportation, also minus 1,300 tonnes. Positive development, however, in industrial, sport architecture and packaging. Heat exchanger closely connected to automotive industry is also negatively affected. When we look at the order development for the Rolling Division, we can say that, the order backlog is rather stable. This is shown to you on Slide #8. And slightly more than 60,000 tonnes order backlog is a positive number. However, the order intake of automotive and aerospace sector was lower, and there was a shift to packaging and industrial applications. And unfortunately, we have to state here that the U.S. tariffs shift somehow the supply chains and bring additional price pressure to the global aluminum business. With this information, I hand over to Claudia Trampitsch, and she will present more details to the numbers. Thank you.

Good morning, also from my side. I can now give you some information on market price development and details from our financial results in the first quarter of 2025. When you look at Page 10, you can see that compared to last year's first quarter, we had an increase in the aluminium price of around 70%, and this influences our revenues. You will see later on in our results, but also various valuation effects out of the aluminium price. When we look at Slide 11, we see that the U.S. Midwest premium development shows that starting in February, when there was an announcement of the U.S. tariffs on aluminium, there was a big increase in that premium. So the increase started before the U.S. tariffs were in place. And this had an effect on our results as we could benefit from that increase in March, or February and March, even before we had to pay duties there. And as we are flexible with our sales from our smelter, we could benefit from that increase. On the other hand, our results are always influenced by the price development of alumina. In the last year, 2024, we had a significant increase, especially in the second half of the year. What we see now in the first quarter 2025 that the alumina price went down. So we are now at approximately USD 350 these days. And this will have an effect in the upcoming months and have also an effect on our working capital. When we now move to our revenues of AMAG Group, then you'll see that we had, as Helmut mentioned before, an increase of 20% compared to last quarter. This increase is mainly due to 2 factors. One of it is the higher aluminium price, as I mentioned before, which affects the revenues of AMAG of the Metal and the Rolling Divisions. And as we said before, we had an increase in shipments and also some mix effects. And therefore, we also saw an increase in volume and mix, which then sums up to revenues of EUR 401.4 million in the first quarter. When we now move on to our EBITDA of the first quarter, we also can show that we have a very good EBITDA out of EUR 46.1 million, which is around 9% higher than last year. And apart from the effects, I mentioned before of aluminium price and volume and mix, which affected already revenue and also material, we also have negative effects here. And one of the negative effect is around EUR 10 million out of the material cost for aluminum because we -- in this first quarter 2025, we see still the effect of the alumina bought in the fourth quarter 2024, which was at very high prices and not affected by then declining alumina prices. In the other section, you can see we have the valuation effects I mentioned before, mainly due to valuation of inventories and derivatives. If we look at the EBITDA change by division, you see that the big part of the EBITDA change came from the Metal Division, which is EUR 3.3 million higher than last year. And the big part of this EUR 3.3 million is due to higher premium levels, as I mentioned before. So the premium levels arise because of the incoming U.S. tariffs and this was the effect we could materialize due to our flexibility. The Casting Division had a slightly growth in the shipping volume, but quite a price pressure and is below last year. And on the other hand, it was an increase at the Rolling Division of EUR 1.9 million due to all the effects we mentioned before. We had an increase in sales of industrial applications and packaging products, but we also had a reduction of specialties. We had a mix shift and also some price pressure. But in the end, it was offset and had a positive impact on this quarter. For the net income after taxes of AMAG Group, it's the increase of 22% compared to last year is only regarding operating profit. There are no other extraordinary effects there. So let me move on to the cash flow of AMAG Group on Page 17. This quarter, we can show an increase of more than 40% in the operating cash flow. When you look at the operating cash flow in the quarter 1 2025, you see that we had -- it amounts up to EUR 51 million and that's mainly due to the operating profit and all other changes, let's say, in the working capital, they set each other off. So it's mainly due to the EBITDA. For the investing activities, we have planned to do less investing activities in the first quarter '25. So it went out as planned and is below last year's level. And this, in total, adds up to a free cash flow in the first quarter 2025 of EUR 34 million. As every quarter, we also show you some ESG figures of our Ranshofen site. And as you can see, they are in total, more or less stable. And Helmut and I mentioned before that, there were shifts in product mix and this affects the scrap utilization rate, as you can see, but it's still at a very, very high level and shows that we are still above the 75%. When we look at our balance sheet, we had an improvement in this quarter compared to the year-end regarding our net financial debt and our gearing. So you see that the net financial debt are lower than 3 months ago. So we are now at EUR 346 million. And also our gearing is now at 1.9, which means it's below last year-end. The same we can say about the equity and cash equivalents as KPIs for our balance sheet where you see that the equity rises around 3%. Main effects are valuation effects and, of course, the higher earnings after tax, and the cash and cash equivalents are affected by the positive cash flow I mentioned before. We now have in our presentation some more detailed slides on the various divisions. I already mentioned all the information that's presented there. So I can hand over for Helmut to give some information on the outlook of 2025.

Yes. And this is summarized on Slide 26. We already mentioned that there is a high level of uncertainty due to trade policies. And I would like to comment that, we also said in our disclaimer at the beginning that we have to take some assumptions, when we prepare the EBITDA range or the outlook for this year. And one essential assumption that we took was that from now on, the situation concerning tariffs would remain stable. It remains at the level that we have today, despite the fact that we know that it can change every day or any day. But we have to assume something. And this certainly affects the rest of the year. It affects the rest of -- it affects our business directly and indirectly, as we used to say directly, because we ship roughly 30,000, 35,000 tonnes to the American market of rolling products. But on the other hand, indirectly, because numerous customers of our Rolling Division will be somehow affected on their side and therefore, may sell less. And therefore, we might sell less to the European market, and we mostly talk about impact on the automotive industry. And as I mentioned before, decline in automotive sales also affects a decline in heat exchanger products. So these are 2 essential specialty areas. And Claudia mentioned before that we are down 5% in specialties because of a shift. So to summarize this, for the Metal Division, our business performance certainly largely depends on the price trends for aluminium and aluminium premiums, and of course, alumina prices. In the past, the shipments were 100% from Canada to the U.S. But these import duties of 25% might change this. We are flexible, as Claudia said, and we could as well ship to Europe. We check basically on a daily basis. The Casting Division, which is strongly dependent on the development of the European automotive industry, certainly sees pressure connected to what I mentioned before. So declining sales in Europe also increase the price pressure in the Casting Divisions. The Rolling Division, I already mentioned. What we see there is that, of course, automotive industry, heat exchanger business is reduced, but this is generally reduced for all our competitors as well. So people move into the other segments. And in these other segments, the price pressure increases, therefore. And this sums up to our first outlook for 2025. We see very volatile conditions. And because of this, despite the fact that we had a good first quarter 2025, we are cautious here and say we expect a range for the EBITDA 2025 between EUR 110 million to EUR 140 million. And with this, I say thank you very much for your attention, and we are prepared for your questions.

[Operator Instructions] The first question comes from Michael Marschallinger from Erste Group.

I have a couple on the U.S. tariff situation, and I would do them all at once because those are some kind of interconnected. Firstly, as you said, the tariffs went into effect mid-March. Could you elaborate on how the overall landscape changed after mid-March in terms of order intake, what you're seeing last 2 weeks in March, April also maybe on the U.S. Midwest premium, in general, what you saw after March 12. Secondly, did you already see a negative results impact in the last 2 weeks of March? And could you quantify this impact? And lastly, is it possible to quantify the direct results impact on the tariffs for the following 3 quarters?

So, for the third question, if I got it right, I think it was related to the primary aluminium and the inventories there. So what we have seen and this affected our first -- the pricing, let's say, for us in the first quarter because our production is stable of the smelter that, yes, there was the tendency of customers, let's say, of companies to rise their inventories in the U.S. to be prepared for eventually U.S. tariffs. So you can see that there was a much higher inventory there. And there are several numbers between -- if it was for 2 months or 3 or 4 months, so we don't know exactly. But that was definitely something that happened in the market because people prepared themselves. But on the other hand, what you need to think about is that, there is a deficit in the U.S. market, and they will need to import on the one hand from externally or from Canadian companies. And as we also know, or hear is that there are some suppliers that have fixed and long-term contracts to sell to the U.S. So that's also happening there. So vis-a-vis the effect on the inventory. So I think it was a peak and now we already see that the inventories are going down. And for the negative results, so I think for -- we do not have a calculation permit, so it's quite difficult to say what's the effect of 2 weeks. But perhaps I can say -- start with the primary market in general. What the effect is for us is that there was beforehand exemption for Canada to sell to the U.S. exemption of duties to sell to the U.S. and other areas had 10% import duties. And now the whole world had to be 25%. So our -- the exemption that we had before now isn't there anymore and that's the main effect we can calculate. And on the other side for the Rolling Division, as Helmut mentioned before, it's really difficult to say an exact amount how it will affect because at the end, it's since some weeks and all the market participants are changing plans, or try to shift and making the new plans. And these are the things why we come up with these plans where we had to calculate in the ups and downs, and how much effect will be there. So it's really difficult, and therefore, I can't give you that exact number to say how high will be the impact, because it's not just an impact out of calculating duties from a basis, which is also quite volatile, but also to see if it affects the volume, or has another price effect.

I could add something for explanation because you said, how did the environment change when on 12th of March, the tariffs were introduced. So we observed that in the Rolling Division, American plants or American producers immediately increased their prices. But of course, they did not increase the prices by 25%. So they have now an advantage on their side. But since they offer lower increase than 25%, it puts pressure on all the foreign companies. And so it is to be expected that the price pressure increases. And as long as capacity is available in the American plants, the orders will go to American suppliers. So for the foreigners, so to say, the market shrinks and the price pressure increases. And this we tend to see basically in all areas.

Okay. Understood. And just I...

I just wanted to add that this is something that, therefore, it's -- when you compare our first quarter, it's not necessarily an indicator for the following quarters because, this effect they don't come at once or have an effect on the EBITDA immediately because as Helmut told you also before, we have quite -- we have an order backlog of some months. So that's also something that will come in the second half of the year, we will see it even more in the fourth quarter. And therefore, we have that came up with that bandwidth because of seeing that the effect will come in the upcoming quarters.

That's understood. And just one follow-up. As you said earlier, the U.S. needs to import because of the deficit. So clearly, they need a trade deal, and I believe there's also some meeting with the Canadian Minister today. So your guidance still assumes that this tariff will stay the whole year. There won't be any trade deals and basically this some positive surprise if there will be any rollback on the tariff situation. That's correct?

Yes. So that's the assumption we took to take what's now the reality as a basis because we really -- there are no signs or no discussions at the moment. And therefore, we said it's the only valid assumption on that side is to take what's now reality and the reality is that we have 25% taxes on tariffs on aluminium products, and therefore, we took this assumption.

The next question comes from Murta Duarte from Kepler Cheuvreux.

I just want to clarify something again on the margin. You mentioned you could shift volumes from the U.S. to Europe. I would just like to understand, well, presumably a lot of companies will be doing that. But even if you were the only ones, what would be the margin impact on the upstream division if you were to ship those volumes and ship them across the Atlantic. And ultimately, I'm just trying to understand why in the short-term and short-term 2 to 5 years, you would need to do that since the U.S. really does not have any other reliable options. I would assume don't want to depend on the Emirates or Australia and China definitely. And the U.S. smelter capacity has been on the decline for 40 years, right? So I think ultimately, when things settle, they will actually still be quite reliant on Canadian aluminum. So yes, I would like to understand how likely is it that you actually significantly need to shift volumes to Europe.

I think what we want -- what we say is that we have the flexibility to shift to Europe. And all the factors that you mentioned will be taken into account if it makes sense, so we can do it. We compare the possibilities and have the ability to be flexible to go to Europe. And for example, if there are, let's say, other participants that have already fixed prices for the U.S., then that could affect the need in the market because they have to shift to the U.S. the whole time. But we do not have that. We do not have long-term contracts, so we can go to Europe and it will always be -- so that we always take the one best value. And that's really, at the moment, it is totally right to you see perhaps when it settles in the U.S. has to buy it somewhere. But what's the fact is that we do not have the advantage of the tariffs anymore we had before. And this also affects the decision if we go to Europe or to the U.S. And I can't say, it for the future what will be the best. But at the end, they will need it from somewhere. You're totally right and they can't build up the capacity immediately in the U.S. themselves. So to summarize it, we have the flexibility. We can go where we want, and we are not binded by any contract and that's the advantage we have.

There's -- to optimize the result for AMAG.

Yes. No, perfect. That's clear. It's definitely good to have that option. Just a quick final question on the Rolling Division. I saw some weakness on the aerospace. Could you just -- yes, just a quick comment on that and if you expect that to persist over the year?

Well, despite the fact that the major aircraft producers, the OEMs announced that they expect a higher build rate compared to last year. The difficulty is -- or the difficulty for the aluminium suppliers is that they have so much on stock that in the first round, so to say, before they buy additional metal, they use, they utilize what they have in the pipeline. And therefore, it is expected or we see it at the moment that they have no need to buy that much despite the fact that they will build more planes than last year, or at least this is what they announced.

[Operator Instructions] The next question comes from Patrick Steiner from ODDO.

I guess, just one quick question left from my side. I would be interested in your expectations on shipment volumes of the divisions in the next quarters and maybe on a full year basis compared to 2024?

Well, as we expect or as we said, we are flexible in the Metals Division, and we do expect that this will volume-wise develop in a stable manner. Casting is very strongly dependent on the automotive industry, but AMAG is, let me say, very well-respected supplier, and we do assume that it's pretty stable. But as I mentioned before, with significant price pressure. So this means that we might be able to achieve the volumes, but the result will not be as good as we are used to it. And in the Rolling Division, it's a daily fight. The same is true in the Casting Division. But in the Rolling Division, we really have to see how especially the automotive industry develops because I mentioned before, direct and indirect influence on AMAG business. And there, we really have to see how these tariffs in the U.S. indirectly influence our sales. Take an example, I can mention this because it was published that Audi said they would not ship now to the American market. So they produce the cars in Europe, so they will produce less cars in Europe and this has an indirect effect on AMAG or the aluminium-rolled product suppliers. And as you know, we have, I don't know, 1,000-plus customers and many of them will be influenced where we do not know exactly how. And so this keeps -- this is the reason for this major uncertainty. But I think every month will bring additional light to the situation. And we forecast still that we would be pretty stable for the remaining year in volume.

The next question comes from Christian Obst from Baader Bank.

First of all, what is your current assumption for the U.S. dollar? And what was the impact in the first quarter? Do you calculate with the current 1.13 or something for the rest of the year? And how does your hedge portfolio is evolving?

As you know, we have some business in U.S. dollar. So now apart from the Canadian entity, which is in U.S. dollar, we also have business in Europe in the Rolling Division where we sell and buy in U.S. dollar. And what's our policy? Our policy is that we try to hedge the effects out of the currency. So we have derivatives there in place. So therefore, we are not that influenced by the U.S. dollar in the operating business, let's say that. But it has, for sure, an effect on translation of the Metal business, as we can say as it translated for our financial results into the euro. So that's the main effect, I think, would be the translation effect. And on the Rolling Division, I would say we have a strong hedging policy to neutralize as much as possible.

But in the end, the translation is minus 10% or something like that or the declining result going forward?

Well, it's -- we have an assumption for the U.S. dollar. And so for sure, it affects then the translation effect. But I would say that you're right, it's -- if we have a weaker U.S. dollar, then it would affect our balance sheet actually.

And then coming back to the primary aluminium production in Canada, of course. So how much approximately can you adjust or redirect really volume, which is now going 100% into the U.S. So just to get a sense how you -- in practice, how this should work going forward? Are you still talking to possible customers? Or so how does it work?

The main difference between the Metal Division and the Rolling Division is that we sell out of the Metal Division commodities. And therefore, you are at the beginning of the value chain, you're selling out of -- it's quite -- it's not that specified, so you do not need a very long process to have customers. And sometimes it also could be the same customer who needs metal in the U.S. or in Europe. So we have a broad portfolio of customers we always talk to and that we did in the past as well because in the past, it could also have been an opportunity to go to the Europe. And therefore, we had the relationships before and now we are still talking to all the customers and now it could happen that we sell sometimes to the U.S. or Europe. But the relationships with the customers was established before. And now it's more complex and I think that's for the whole business, what we have that we -- when you are in this -- we have quite long-term relationships with our customers. It's also true for the Casting and the Rolling Division. And that's in these times of uncertainties, it's always important to be quite close to your customer, talk to them and find solutions. So that's how we manage it.

Okay. And so in the end, if needed, you are very quickly able to redirect 20%, 30% out not going to the Americas, but to Europe or elsewhere? Or is there some kind of a limit that you say, okay, we can move between 10% and 20% or we can move up to 50%.

So, I think we are prepared for various options and can decide it on how the market goes. And therefore, we are really flexible because of all the things I mentioned before.

Okay. And the last one question is, so despite talking about all these kind of uncertainties, at the beginning of the year, so before all these tariff talks, we started with some kind of a positive idea into the new year, especially when it comes to Europe because of the clean industry plan from the EU new government in Austria, maybe also a little bit supportive new spending coming from Germany, maybe going forward. Do you see any kind of positive -- maybe possible positive support coming from these developments in the EU, in Germany and maybe also in Austria?

Well, when you talk about the green industrial deal, so far, I think I can say that we did not see any major change. What we rather see is that because of this communication, several customers now might think that this big wave of sustainability-oriented development is becoming flat now or lower or things can be postponed and investments into sustainability issues can be postponed. And so this is maybe an additional uncertainty that is introduced at the moment.

Okay. So, not that much of the support coming from maybe lower energy prices or possible investments. So for you, it's more an uncertainty.

Yes, not yet. We can say, not yet. So I think people are studying possible influences and will most likely come up with some strategic approaches for bigger companies. But so far, there is no major change to the weeks before or the months before.

You talked about the Germany's announcement, and I think that's the big point there. That's an announcement and it has come to life to have some concrete projects and then coming to life. So I think it's too early to see where it will go and how fast.

Of course, we are in a very early stage when it comes to these issues.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Christoph Gabriel for any closing remarks.

Ladies and gentlemen, thank you very much for having joined this call. As always, I'm really happy to assist you with any further questions you might have. So in that case, just give me a call or write me an e-mail. Otherwise, I wish you a pleasant Tuesday, and see you soon. Thank you. Goodbye.

Thank you. Bye.

Goodbye.

Ladies and gentlemen, the conference is now over. Thank you for choosing chorus call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.