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

Ladies and gentlemen, welcome to the First Half Year 2025 Results Presentation Conference Call. I am Serge, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. The forecasts, plans, future rates assessments and statements contained in this presentation were made on the basis of all information available to AMAG up to 14th July 2025. The economic and trade policy environment has changed several times in recent weeks. Internal calculations, earnings analysis are based on various assumptions. These include, among other things, the continuous validity of global U.S. import tariffs on aluminum products. If the assumptions underlying the forecast do not materialize, targets are not achieved or risks arise, actual earnings may differ from those currently anticipated. We assume no obligation to update such forecasts in light of new information or future events. This presentation has been prepared with the greatest possible care and the data has been checked. However, rounding, transmission or printing errors cannot be ruled out. AMAG and its representatives accept no liability for the completeness or accuracy of the information contained in this presentation. This presentation is also available in German, whereby the German version shall prevail in case of doubt. 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 half of 2025. Today, we have Helmut Kaufmann, CEO; Claudia Trampitsch, CFO; as well as Victor Breguncci, CSO, who will present the development and results of the first 6 months of this year. As usual, after the present, you have the opportunity to ask questions during the Q&A session. I would now like to hand over to Helmut, please start the presentation. Thank you.

Good morning, ladies and gentlemen, from our side. I would like to start with the financial highlights on Slide #3. Once again, we can say that our broad setup, especially our broad product portfolio as well as our regional activities, combined with flexibility helped us to achieve a solid half year result in a difficult environment. The H1 2025 result reflects, and we can say as expected, the negative impact of the trade policy, especially U.S. tariffs. This negative impact was visible, especially in Q2 of this year. Despite that, our revenues grew by 11.1% to EUR 786.2 million as a result, especially of the higher aluminum prices and increased shipment volumes compared to the same period of last year, where we were able to achieve EUR 707.7 million revenues. EBITDA reached a level of EUR 80.6 million, and this was increasingly affected by U.S. tariffs and higher energy, raw material and personnel costs and is down by 15.4% compared to last year's period where we achieved EUR 95.3 million. Net income after taxes reached EUR 23.4 million and is 29.9% down to the last year's first half of 2024. The cash flow from operating activities of EUR 76.2 million was roughly the same as in the previous year, where we achieved EUR 75.7 million. So a short outlook for the rest of the year. The EBITDA range that we provided last time was slightly adjusted from now EUR 110 million to EUR 130 million as a result of market conditions, especially. Details on financials will be provided by my colleague, Claudia Trampitsch, later on. So let me move on to Slide #4. We would say from our point of view, the most important positive highlight in this first half year was the MoU agreement for power contract -- for future power contract for our smelter participation at Aloutte in Canada. This is so important because it secures a profitable continuation of this smelter, and we can say for the next 20 years seen from today. As you know, Aloutte has been an integral part of the AMAG Group and AMAG positioning over the past 30 years. And this agreement that was basically signed between the Aloutte company, the government of Québec in Canada as well as the energy supplier, Hydro-Québec is agreed to provide an energy of 1,085 megawatts, covers 100% of today's requirement of electric power and enables slight future growth. The contract -- today's contract expires end of '29. The new contract starts January 1, 2030, and continues for 15 years to 2045. And as already mentioned, this secures and enables long-term planning and is very essential for future investment in this activity to produce primary metal there. The electricity price depends on aluminum price as well as Midwest premium. It is a risk-sharing contract. And thus, this creates competitive conditions for AMAG and partners at this Aloutte smelter. Let us move on to Slide #5. We always told you that the aircraft industry is important for us. And so it is important for us how our main customers see us. And we are very proud to say that for the fourth time in a row, AMAG managed to get the top rating at the Airbus SQIP program. This is a supplier quality program. And it is, I think, unique that for 4 times in a row, we received this highest award. Also, we are happy to say that we were able to get a so-called Win-Win Cooperation Award of the Chinese manufacturer, COMAC, because it is also important for AMAG to spread -- to widen the customer base in the aerospace industry. And Slide #6, we continue to be active in the area of sustainability. We did commission a new preheating station for the supply of liquid metal for foundries. So we are a producer of recycling foundry alloys in Ranshofen. And what is special about this equipment, this is, so to say, to make AMAG Casting fit for the future. This new equipment is already suitable also for natural gas or hydrogen operation, which might be required in the near future to reduce the CO2 emissions at the location in Austria. And finally, I would like to announce that we, again, are listed in the VÖNIX Sustainability Index in Austria, and we have been listed since 2014 continuously. With this short introduction, I would like to hand over to my colleague, Victor Breguncci, who will tell you now about market and shipments in the first half.

Thank you very much, Helmut. Good morning, everyone, from my side. So if we move back to -- move forward to Page 8, we see the traditional sentiment indicator that we always present. And as this is no surprise to all of us, it remains very uncertain where we stand, and there are plenty of reasons in the market today that makes us believe it can remain a little bit longer in that direction. So it remains subdued, the global sentiment, Eurozone to our positive renovation. We see signs of improvement in the -- each economy, especially we see in Spain, a very positive growth. But Europe as a whole has been very much impacted manufacturing-wise by the geopolitical discussions we're having, which will be a topic going further. But before we go into our shipments, it is important to look on Page 9 that the fundamentals have remained unchanged. So the demand for aluminum according to the Commodity Research Unit that we always use as a reference, remains stable and positive in the future. When we look from 2010 to 2024 and '25, we see a steep increase in demand for primary aluminum, and we see this trend remains unchanged for the next 5 years. When you go into rolled products, we see a steep increase driven especially by the transport and packaging industry, where aluminization, as we say, has been happening. But we see that the geopolitical and other discussions we are having is impacting on how this product portfolio and how the customer mix has impacted us in the first 6 months. So in Page 10, we bring also some statistics reconfirming what I just said before, transport and packaging driving the whole demand for aluminum rolled products and the mechanical engineering also being a strong focus on the first 6 months of this year, given the shift into the product mix. On Page 11, we go -- we have a little bit of more numbers on shipments, and we show compared to 2024, an increase of 3% in our top line, especially driven by the Rolling Division. Metal has -- and casting has remained stable. But Rolling, we see a growth that we normally captured into the industrial segment, which is an area where we saw, based on our product portfolio flexibility, the capability of our staff in Ranshofen to shift from one segment to the other, the adjustments into the demand from our traditional OEMs in automotive and aerospace, given the dilemmas and challenges in the supply chain, we're able to adjust our capacity in a very quick way and capture opportunities in the industrial market. So this is -- I see this with a lot of effort and capabilities in our mill that we're able to, not only capture this very important demand from the industrial, but also keeping the capability to -- for the re-ramp up of the automotive degrading in the aerospace sector when this demand comes back in fruition. So with a little bit more detail on Page 12, we see what happened in all the segments compared to 2024 first half. So in automotive and aerospace, we see a little bit of a retraction, not driven by demand, but driven by the supply chain dilemmas that we see today in aerospace, but also in automotive, given the uncertainties that we have in our OEM customers. But we see the positive trend in industrial, 10,000 tons more compared to 2024 and also in packaging, where we have almost 2,300 tons more, which is adjusting our capacity to fit the market needs. We had volume-wise, a very good first 6 months. We have challenging market in realization of our margins because of these mix changes. But as you can see on Page 13, we're navigating the turbulent waters with a stable order intake. So in Q1 and Q2, we had same level of order intake, but still remains a lot of uncertainties what could be the impact in Q3 and 4 depending on what the tariff scenario brings, not only directly business to us in North America, but also indirect with regards to our customers in Europe and Asia, given the whole communication of the market because of that reality. So I try to end with a positive feeling for the first 6 months. And I transition now to my colleague, Claudia Trampitsch, who is going to bring us to the numbers side of the equation. Thank you very much.

Thank you. Good morning from my side as well. Before I go in detail with our results of the first 6 months 2025, I want to give you some information on the development of market prices. So first of all, the aluminum price, which you see on Page 15, rose around 6% compared to last year. And this has an impact on our sales in the Metal Division. And when you go to Page 16, this is perhaps the more relevant development we can see now is the development of the U.S. Midwest premium. As you can see on this page, due to the announcement of the U.S. tariff this year, we saw 3 big increases in the U.S. Midwest premium. One was in February, which I talked about last quarter, where we already had the announcement of 25% tariff for aluminum shipped to the U.S. And then the second one was the announcement of the 50% tariff, which we saw in May. And thereof, you see on the one hand that we had an increase in the Midwest premium, but what we also see is that, it doesn't reflect completely the costs we are facing because of these duties. What we also can see out of this page is that, before March 2025, Canada had an exemption of the actual tariff, which were 10% at these times. And this profit or benefit we had until then now is not there anymore. So we are negatively affected by the U.S. tariffs, and this we will then see later on in our results. A positive development we can see when you go to Page 17 on the alumina price. Last year, it's skyrocketed in some kind due to shortages on the bauxite and alumina production side. But now it has stable and especially for the Q2 2025 onwards, we will -- we can see this now in our results that our alumina price and the cost we have in our P&L decreased on that side. But in the first half year 2025, it is still -- our costs are still higher on that side than it was last year. Now let's move on to the revenues of our group. As my colleagues pointed out before, we had a growth tonnage-wise. And at the end, we also had a growth on the price side. So in total, our revenues went up from EUR 707.7 million up to EUR 786.2 million. So the increased with 11%. What are the reasons for that? So the main reason is, as I told you before, the aluminum price went up. So we had there the main increase, you can see the EUR 51 million due to the price increase. The second one, as my colleague said before, that we had an increase in volume and mix on the Rolling side, especially. And therefore, we had also here an increase on our revenues. So now let me move on to the Page 19, where you see the EBITDA of AMAG Group. And here, you can see that despite the revenue increases, which we could show you before, at the EBITDA level, we could not see this -- we cannot see the same increase because of costs due to personnel costs, energy costs, raw material costs and the effects of the U.S. tariffs affecting our results, to the extent that we, at the end, have a lower EBITDA than last year. So we went down to 15% from EUR 95.3 million to EUR 80.6 million. When you look at the reconciliation, here are the main reasons we already talked before. So you see the effect of the aluminum price. You see the prices premiums went down. This is, as we already talked before. One hand, effect on the Metal side, but especially on the Rolling side due to the product mix we had in the first half this year. When we look at the EBITDA changes by division. For the Metal Division, you see the biggest effect at the Metal Division, and this is really due to the higher alumina costs that we had in the first half of 2025 compared to the first half of 2024 because as I said before, the high prices we faced last year -- at the end of last year are now reflected in our costs. And the Casting Division is affected by a weaker market environment in the automotive industry and the high energy costs as well. And you can also see that we had a lower EBITDA on the rolling side for the reason I mentioned below before. Even more, when we look at the EBITDA of the Q2 2025, which you can find on the next page, it's even more evident that all the market development, Victor talked before and which we saw in the market prices, combined with increased costs and U.S. tariffs lead to a lower EBITDA for the second quarter 2025 compared to 2024, even though we also had a higher revenue in the second quarter. So here, you really can see that due to the U.S. tariffs and the increased price pressure, we had a lower EBITDA than last year. A positive effect you can -- negative effect you also can see here is still the raw materials and energy is affecting the EBITDA. Nevertheless, the alumina prices at the moment going back and will get a better effect in the future. When we look at our net income after taxes, there's nothing in particular that to say about it. It is also lower than last year, affected by depreciation, financial results and income taxes. But all these things, there's nothing extraordinary in it. It's just the development, normal development. When we look at the cash flow, we can -- you can see that we had an increase -- in our operating cash flows or it's quite stable at the end. But what we can show you is that, we had an investment -- investing cash flow that is significantly lower than last year. And here, you also can see that we are flexible and we are, at the moment, looking at every position there to go with our investment accordingly to our operating results and activities. But what I also can tell you is that, we are doing that quite thoroughly and so that we have our plant at the best condition needed. And therefore, at the end for the free cash flow, you see an increase, which is -- which benefits from our work we do on the working capital side and also on the investment side. And then now move on to the Page 25 to give you some information on our balance sheet figures. I can tell you that despite all the negative effects we talked before, we still, at the end, have a stable and solid and good results for the first half of the year. And this is also reflected in our net financial debt and also in our balance sheet equity ratios and so on. And the effects we saw on the financial debt side are mainly due to some repayments of debt, dividend we paid this quarter and some smaller other effects. But at the end, nothing special or extraordinary, and the net debt-to-EBITDA ratio is mainly determined by the lower EBITDA we had this half compared to last half of the year. And the same is true for our equity, which is still -- not still, which remains stable and 1% less than at the end of the year. And also, on the cash and cash equivalent side, we see that we have -- there is a little -- there's a downside on the cash and cash equivalent, but this is due to refinancing activities that were -- where we had our borrowings already last year. On the following pages, you see the information for each division, but I will not go through all of this. As I already told you, the main reasons for the development of our EBITDA beforehand. And so, let me move on to our last slide I will present you, which is about our ESG key figures. And there, you can see that point out the first one, which is the scrap utilization rate. And even though we had a change in product mix, which always can affect this number, we are still on a high level and have an even higher scrap utilization rate than compared to last year. And I think when you look at everything else, it's -- these are stable numbers. And I finally want to point out our accident rate, which is very low, which is a good sign for us. So now I want to hand over to Helmut to give us some information about the outlook 2025.

Thank you. I move on to Slide 32. And with all the explanation given by my colleagues, I think it's fair to say that we can expect a difficult, challenging economic environment for this second half of 2025. Volatility will remain. We know that there are lots of political negotiations underway, but this might change daily. So with all our outlook that we did, we assume that it continues the way it is at the moment. And this looks for the Metal Division, as Claudia explained, it's, of course, strongly dependent on the price development for aluminum, the premiums as well as raw materials. The influence of the expired tariff exemption for Canada was already explained. This does have a negative impact on our results. And we have to stay flexible in terms of region of delivery of our products. So more or less on a daily basis, our colleagues judge whether we should deliver into the U.S. or bring the primary metal to Europe. For the Casting Division, we expect a weak demand from the automotive industry. Casting foundry alloys are a local business, local [Audio Gap] difficulties for the automotive industry here in Europe. And for the Rolling Division, Victor nicely explained the shift in product mix with our usual specialties, automotive, aircraft, sports, brazing materials being under pressure. We were able to shift to other areas, especially industrial application and packaging. But nevertheless, this will remain difficult in the second half and weakened earnings compared to last year are expected. So in total, this made us reduce our upper limit for the EBITDA range compared to our last announcement. And therefore, we forecast an EBITDA range between EUR 110 million to EUR 130 million as a result of these changed conditions on the market. And we have to say, unfortunately, this high uncertainty concerning the U.S. tariffs remains, and this will have a major impact because the 50% were not really influencing the first half of this year. So thank you very much, and we are now all ready to answer questions.

[Operator Instructions] And the first question coming from the line of Christian Obst from Baader Bank.

I have two questions. First, in one of your last sentence, you said that it's more complicated in the second half to shift from auto airlines or aircraft business to other business. Can you give us more detail why the shift is more complicated in the second half? And what has driven this kind of possibility in the first half and what changed then into the second half? And second one is looking at Airbus, especially, I think the development is not that bad. So why is the current situation that difficult and why it should not improve going forward?

Good. Thank you very much. Let me just go into -- the shift from aero from auto and brazing into industrial is, we can use -- we can flex the team, we can flex the organization to produce. But when we have -- we're talking about specialties, we're talking about things that are unique and very much relevant to specific customers. When you try to bring this capacity into a market that has a depend on markets where I cannot drive this, this is -- in the end, it is a commodity. So we have a 50% tariff on a product that is close to a commodity level, there is no kind of room of negotiation that I can bring this forward. So in the end, when you have a market that has overcapacity globally for flat-rolled products, and you cannot simply bring your product forward in this reality. So I'm trying to tell you in a very native truth as we could say, this is not possible, right? Second, in the aero, I mean, the supply chain to produce an airplane depends on all the parts that goes into an airplane. Raw material is not a problem. If you look at the whole supply chain for aluminum, steel, titanium today, I think the main OEMs orchestrated that demand. But there are difficulties in the supply chain and inventory that prevents the build rates to go at the steep rate that they wanted to. There is expectations that this will increase starting now in the second half of '25, beginning of '26, but you cannot forget that the demand from the raw material always has a lag you can say, between 10 to 12 months. So there is inventory that can cover for this ramp-up, and we will then for sure, accommodate the growth for that might come early in '26 or mid of '26. So there are elements that are away from specific demand because demand for airplanes remains stable, backlogs are huge. So it's not a matter of demand. It's a matter of having the supply chain deliver what they need.

Okay. Yes, very good. And I have another question concerning the personnel costs. So having in mind maybe that the overall tariffs, maybe they stick with 15% or whatsoever and volatility remains a little bit further going forward so that the entire framework might not change dramatically over the coming months and quarters. So have you any plan to take some special initiatives on the personnel cost side?

We are not so sure acoustically if we really were able to catch. Can you please repeat the final question?

Yes. Okay. Very easily, have you any plans to maybe reduce the cost base on the personnel cost side because of the ongoing uncertainty and volatility in the market?

Honestly speaking, we are always controlling our cost. We do have an internal program, which we call [ Challenge 25 ], which keeps cost in -- within the limits that we set ourselves. And -- but honestly, we did this in the past. In Germany, we say it [Foreign Language]. So we, of course, do not grow our personnel. We look at adjustment accordingly. But at the same time, especially in operations, flexibility that we need on the market needs that we keep all our equipment running. It's not so easy to just switch off a piece of equipment because then this -- and reduce the staff there, then this automatically means that we would go out of this business area. And so, flexibility is super important in this environment.

[Operator Instructions] We have the next question coming from the line of Steiner Patrick from ODDO BHF.

Patrick Steiner speaking from ODDO BHF. I had some technical issues and missed the beginning of the call. Could you therefore please give us a bit more color on the impact of declining alumina prices on the second half of 2025 in the [indiscernible]?

So we are now at the alumina price level, let's say, of around 14%. If you compare this with the higher range percentage we had at the end of 2024, where we were around 28%, 30%, so almost double. So we will see a decline on this side in the second half of 2025. But on the other hand, the second half will also be the one where we will really see the impact of the 50% tariffs as well. And this has 2 sides at the end. So if the Midwest premiums don't cover the 50% increase tariffs in the -- as an increase in the Midwest premium, then we will see the development in the other direction. But we will see an impact on that on the raw material cost for sure in the second half.

The next question comes from the line of Michael Marschallinger from Erste Group.

Just one question from my side, and it's on Slide 16, the U.S. premium development, a strong increase now from EUR 400 to [ EUR 1,500 ]. This does not really seem really sustainable. So could you maybe give us some color what you're seeing how this premium is impacting the U.S. aluminum market? And if the 50% are going to stay really a sustainable environment, could you maybe comment on that, please?

When you -- you're right. When you see the increase in the premium, you see it's really -- the increase is big. But when you look -- you can also look at the U.S. Midwest premium duty unpaid when you deduct the duties. And there, you would see that it decreases. So putting into account, you have to pay the tariff, it would be lower than before, and that shows that the U.S. market has not so much demand or had already inventories before that they are using now at the moment. And I think it's not -- normally on the commodity side, it's easier to say if there is demand or not. But here, you also have the inventories and you have perhaps also the -- you can see the impact in the lower demand on the end customer side as well and therefore, lower demand for rolling mills and so on in the U.S. And for -- is it sustainable to have 50% tariffs and what's the effect on that, I can tell you that I would like to know that as well because it's something that has a very big impact on our side. But you can't know because as this is something that comes -- was a political decision, it only can get away with decisions or agreements on the political side. And therefore, it's difficult from an economic point of view as a company to have -- to see how long it will stay or not. So that's nothing we can evaluate to say something about it.

There are no more questions at this time. I would now like to turn the conference back over to Christoph Gabriel for any closing remarks.

Thanks to all of you for attending this call. As always, I'm pleased and happy to answer any further questions. In that case, I invite you politely to just give me a call or write me an e-mail. Thanks a lot, and have a wonderful Thursday.

Thank you very much.

Thank you. Goodbye.

Thank you.

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.