Bron : in the right vein 1.08
Ryans notes
V price slide hits AMG’s bottom line
Noting the deteriorating market prices of all AMG’s portfolio and the significant drop in second quarter prices compared to the first quarter, Heinz Schimmelbusch, AMG’s CEO, said, “We obviously had a disappointing quarter.”
Singling out vanadium, Schimmelbush said, market prices climbed consistently from the beginning of 2018 into the first quarter of 2019 and then plunged in a very short period beginning late in the first quarter of 2019 until present.
“We have seen spikes and crashes in the vanadium market before, however, this pattern is unique in the history of the metal,” Schimmelbush said. “Traditionally, vanadium prices follow a consistent pattern – a short spike followed by a swift decline. This parallel pattern has a minimal effect on our inventory position as we build only a limited volume of high-priced inventory in the short spike period.”
“In contrast, the sustained period of price acceleration in 2018 and into 2019 resulted in the buildup of a significant volume of high-priced vanadium inventory. This unusual pattern resulted in a substantial impact to our profitability as our inventory position experienced cost adjustments due to the sudden and severe decline in market price, which eliminate the profitability on sales for the entire working capital cycle.”
AMG’s vanadium business is robust and very profitable at the current market price, despite the price decline, Schimmelbush said.
In the short-term, AMG’s financial results will be impacted by lower prices as higher cost inventories are sold. Because current spot prices across all of AMG’s portfolio are significantly below the prices in the first quarter of 2019, the company has updated it full year EBITDA guidance for 2019 from the previously announced target of $150-million to $120-million.
AMG Advanced Metallurgical Group reported second quarter 2019 revenue of $303.6 million, an 8% decrease from $329.3 million in the second quarter 2018. EBITDA for the second quarter 2019 was $23.8 million, a 53% decrease from $50.7 million in the second quarter 2018, largely due to lower vanadium prices versus the second quarter of last year.
The Critical Materials segment achieved an EBITDA of $12.4-million Q2 2019, down 65% from 36.6-million in the year-ago quarter. That drop is almost entirely explained by prices of ferrovanadium, as well as chrome metal prices and additional ramp-up costs of the lithium concentrate plant.
AMG’s average quarterly market price for FeV fell 36% to $21.82 per lb in Q2 2019 compared to $34.28 in Q2 2018 and was 45% lower than the Q1 2019 price of $39.96. AMG said that the spot FeV price was $16 per lb on July 29, 2019, 59% lower than the 2018 average spot price of $38.95.