Edited Transcript of AMG.AS earnings conference call or presentation 5-May-20 6:00pm GMT

I will now pass the floor to Dr. Schimmelbusch, AMG’s Chairman of the Management Board and Chief Executive Officer.

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [3]

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Thank you, Michele. I’m pleased to report that out of 3,200 total AMG’s employees in 36 sites in 15 countries, AMG has only had one employee that’s positive for COVID-19. The employee has since fully recovered and has returned to work. We have presently only 5 active self-quarantine cases. However, as a result for the coronavirus crisis, some of our production facilities are operating below capacity, reflecting reduced demand levels. Our financial results reflect the lower-price environment we are experiencing, and we continue to operate in an austerity mode and focus on things we can control, such as operational efficiency, capital expenditures and overhead costs. The focus on expenditures will help to preserve our solid liquidity position. Despite our enhanced focus on cash flow, we continue to forecast our key strategic programs, the construction of the plant in Zanesville, Ohio, which essentially will double our recycling capacity for refinery residues, and that is proceeding as planned, utilizing the funds raised from our municipal bond issued. Basic engineering of the new lithium hydroxide production facility in Germany is expected to be completed by year-end. Shell and AMG Recycling B.V. has started to operate and will pursue refinery residue recycling opportunities globally.

We had an excellent order intake in 1999 — in 2019 of $249 million and of $104 million in the first quarter of 2020, representing in that quarter, a strong 1.3x book-to-bill ratio. But the unfortunate foreseeable depressed conditions in the aerospace industry due to COVID-19 has forced us to postpone the pursuit of a public offering of AMG Technologies.

I would now like to pass the floor to Jackson Ducnkel, AMG’s Chief Financial Officer. Jackson?

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Jackson M. Dunckel, AMG Advanced Metallurgical Group N.V. – CFO & Member of Management Board [4]

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Thank you, Heinz. I will be referring to the first quarter 2020 investor presentation, which was posted earlier today on our website. Starting on Page 3 with an overview of the financial highlights of the quarter. AMG’s financial performance in Q1 was lower versus the prior year. Revenue for the quarter decreased by 20% to $278 million, driven by a significant metal price decline across AMG’s entire portfolio versus the prior year. EBITDA decreased by 56% to $22.3 million in Q1 2020 from $50.4 million in Q1 of last year, which is primarily due to lower prices for ferrovanadium and lower titanium alloy sales. Net income attributable to shareholders for Q1 decreased to a loss of $13.6 million compared to income of $14.8 million in the prior year, however, the result this year was significantly affected by an $11.7 million noncash deferred tax charge in Brazil that I will discuss later.

I’ll turn to a discussion of our 2 segments and start with AMG Critical Materials on Page 4 of the presentation. On the top left, you can see that Q1 revenues decreased by 30% to $159 million versus the prior year. This decline was largely driven by lower average prices across all 7 of the business units. These price decreases were partially offset by higher volumes in ferrovanadium, graphite and silicon metal.

On an adjusted basis, Critical Materials Q1 gross profit decreased by $25.7 million compared to the first quarter of last year. The reduction in gross profit was largely driven by lower profitability in our vanadium business offset by increased profitability in graphite and silicon.

Critical Materials Q1 SG&A expenses were $18.8 million, $2.7 million lower than Q1 2019, primarily due to lower personnel costs, lower professional fees and initial cost reduction efforts across the business.

EBITDA for the Critical Materials segment was $9.7 million, representing an EBITDA margin of 6%.

Moving on to AMG Technologies on Page 5 of the presentation and starting on the top left of the page. You can see that revenue increased in this quarter. This is mainly due to the completion of Engineering’s first ceramic matrix composite vacuum furnace and was offset by lower prices and volumes for the Titanium Alloys & Coatings business that was driven partially by a slowdown in the aerospace sector.

First quarter gross profit decreased by $7 million compared to Q1 2019, mainly due to lower profitability from Titanium Alloys & Coatings.

SG&A expenses were essentially flat at $16.1 million, primarily due to higher insurance professional fees offsetting initial cost reductions.

AMG Technologies first quarter 2020 EBITDA decreased by 34% from Q1 2019 to $12.7 million due to lower profitability of the Titanium Alloys & Coatings business noted earlier.

The company signed $104 million in new orders during the first quarter of 2020, the highest since Q1 2018 and representing a 1.3x book-to-bill ratio. This higher book-to-bill ratio was largely driven by strong orders of turbine blade coating and remelting furnaces for the aerospace market.

Turning now to Page 6 of the presentation. On the top left, you can see that AMG’s first quarter 2020 expenses were $34.9 million compared to $37.4 million (sic) [$37.2 million] in the first quarter of 2019. This decrease is primarily driven by Critical Materials, as I noted earlier.

AMG’s first quarter 2020 net finance cost decreased to $5.4 million from $9.2 million in the first quarter of 2019. This decline is mainly driven by lower borrowing rates and lower FX rates in addition to a large derivative charge in the prior period. AMG recorded an income tax expense of $16.5 million in the first quarter of 2020 compared to $5.9 million in the same period of 2019.

This increase was primarily due to the significant devaluation of the Brazilian currency. Movements in the Brazilian real exchange rate impacted the valuation of the company’s net deferred tax asset base. The devaluation of the real during the first quarter of 2020 resulted in an additional noncash tax expense of $11.7 million. In contrast, the appreciation of the real in the first quarter of 2019 resulted in a $1.9 million tax benefit. If you strip out these 2 effects, AMG’s income tax expense would have declined from $7.8 million last year to $4.8 million this year due to lower profitability. I should add that despite the devaluation issue, the Brazilian real depreciation is, of course, a benefit for our cost reduction in Brazil.

Because of the effect of the Brazilian real devaluation, we typically caution investors to focus on cash taxes. But this quarter, we only paid taxes of $0.9 million in the first quarter compared to tax payments of $3.9 million in the same period of 2019. This low payment was the result of a tax refund for 2019 as well as the relief available due to international COVID-19 tax measures, which enabled AMG to delay most of its tax payments.

Turning to Page 7 of the presentation, you can see that the top — on the top left, the cash used in operating activities was $3.7 million in Q1 2020 and compared to cash generated from operating activities of $6.9 million in Q1 last year. This decrease was mainly due to lower profitability. AMG’s annualized return on capital employed was 7.7% for the first quarter of 2020. AMG finished the first quarter of 2020 with $192.4 million of net debt. The increase versus year-end levels was mainly due to the significant investment in growth initiatives during the quarter, especially the vanadium expansion.

AMG’s balance sheet is sound, and the company enjoys significant liquidity. As of March 31, 2020, AMG had $208.9 million of restricted — of unrestricted cash and equivalents and total liquidity of $372 million.

That concludes my remarks. I would now like to pass the floor to Eric Jackson, AMG’s Chief Operating Officer.

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Eric E. Jackson, AMG Advanced Metallurgical Group N.V. – COO & Member of Management Board [5]

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Thank you, Jack. Prices for all of our products were substantially lower in the first quarter of 2020 compared to the first quarter of 2019. Again, the extent of the decline in prices is most clearly illustrated by ferrovanadium, where sales prices fell by more than 70% quarter-over-quarter. This resulted in compressed margins and lower earnings. However, as Dr. Schimmelbusch has previously stated, all of our operating units are run rate EBITDA positive even at today’s low price. This underscores our focus on productivity, cost reduction and risk management in all of our operating units.

Operationally, we are responding decisively to the dramatic impact of the global pandemic and the related upheaval in the aerospace and automotive industries and end-market demand. We are focusing on things we can control. We are aggressively reducing operating costs, managing working capital and cutting SG&A expenses across the company. We have implemented a hiring freeze, reduced staffing levels where appropriate, adjusted production levels to meet lower end-market demand and furloughed employees where necessary. We’ve reduced staffing levels total short term and permanent by approximately 15% from year-end. We have reduced professional fees and research and development costs and renegotiated supplier and service provider contracts where appropriate. We continue to be focused on driving operating cash flow and have reduced, eliminated or deferred capital spending on nonstrategic capital projects.

That being said, we continue to progress our important strategic initiatives in spent catalyst recycling, the expansion in Zanesville, Ohio and our joint venture with Shell Catalysts & Technologies as well as our lithium project in Germany. AMG continues basic engineering for its lithium project in Zeitz, Germany, and has committed in excess of $140 million to date in engineering contracts, engineering and construction contracts for the Zanesville facility.

These projects have not been significantly impacted by COVID-19 and are on schedule. They are fundamentally sound and will drive AMG’s earnings growth in all market conditions. The financial performance of our Critical Materials business units has been impacted by falling prices, most dramatically in vanadium and chrome. We do believe, however, that these businesses are low-cost producers when compared to our competitors and using publicly available information. We will come out of the other side of today’s depressed market in a very strong competitive position.

AMG Technologies delivered solid results in the quarter with orders for turbine blade coating and remelt furnaces being particularly strong. AMG Engineering successfully completed the installation of the first ceramic matrix composite vacuum furnace and passed the final acceptance test at its customer’s location. This represents a significant achievement in AMG Engineering’s ongoing new product development program.

As Dr. Schimmelbusch noted, we’re grateful to report that we have no active confirmed COVID-19 cases globally. To protect the health and safety of its employees, AMG continues to implement preventive measures, such as practicing social distancing, remote working when possible and restrictions on travel.

I would now like to pass the floor to Dr. Schimmelbusch, AMG’s Chief Executive Officer.

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [6]

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Thank you, Eric. AMG operates with (inaudible) business resilience, and we are acutely focused on safeguarding against the potential for future pandemic-related disruptions. Management continues to drive operational efficiency and manage for cash preservation in 2020 to ensure ongoing financial health and stability. One of the COVID-19 problems we deal with is the travel restriction as regard to the execution of Engineering contracts. This is leading to delays in order execution.

As previously announced, due to the COVID-19 situation is developing, there is uncertainty around the severity of the economic impact. Therefore, AMG has decided to withdraw its earnings guidance for 2020. A new target will be announced once the global industrial economy begins to stabilize (inaudible).

Operator, we would now like to open the line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We’ll take our first question.

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Krishan M. Agarwal, Citigroup Inc, Research Division – VP & Analyst [2]

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Can you hear me?

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Unidentified Company Representative, [3]

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Not very well.

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Krishan M. Agarwal, Citigroup Inc, Research Division – VP & Analyst [4]

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Okay. It should be better now?

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Unidentified Company Representative, [5]

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Yes, now we hear you.

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Krishan M. Agarwal, Citigroup Inc, Research Division – VP & Analyst [6]

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Yes. This is Krishan Agarwal from Citigroup. I mean, as you mentioned that the — most of the divisions are operating below capacity, can you give us a sense as in how much of the decline in the capacity utilization we should think for the Critical Materials and the Technologies business, given that we are already halfway through the quarter? That will be helpful.

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [7]

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Well, the majority of our plants are operating. There are few regulatory or demand-related shutdowns, very few. Some of the units are operating full capacity that includes tantalum, lithium production in Brazil, silicon metal production, antimony production and others, where we are partially operating under long-term sales contracts. So in Critical Materials, there are very few below capacity maybe coming in aluminum a little bit because of automotive in the United States.

In Technologies, AMG Technologies, we are, of course, a function of a little bit of the GM closure in the United States. And therefore, temporarily and in line with that, we reduced our capacity in the U.S. and Mexico.

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Krishan M. Agarwal, Citigroup Inc, Research Division – VP & Analyst [8]

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Understood. And then, I mean, given the capacity closures are there and the operating rates are lower in (inaudible) businesses, would you be able to break down the — or approximation of the breakdown for the fixed cost between the Critical Materials and the technology businesses, I mean, that’s just basically to understand the potential impact from the operating leverage in the second quarter.

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [9]

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No, I don’t think we do that.

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Krishan M. Agarwal, Citigroup Inc, Research Division – VP & Analyst [10]

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Understand. Let me put it in this — slightly different way. You’ve achieved a significant decline in SG&A in the first quarter, mainly in the Critical Materials business. And then Eric mentioned that there is a sort of 15% reduction in the staff versus end 2019 level. Would it be fair for us to assume that the decline in SG&A cost is proportional to that decline in the staffing level?

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [11]

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Well, the overall staffing level, partly temporary, partly final, has declined by about 15% to date. We continue working on SG&A. That is a continuous program. And I don’t think we compare those percentages.

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Krishan M. Agarwal, Citigroup Inc, Research Division – VP & Analyst [12]

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Got you. Okay. Final question or final 2 questions, if I may. Given that the comment that you have postponed the nonstrategic spending, especially on the capital expenditure side. Is there any kind of a revision to your full year 2020 CapEx guidance versus a earlier one?

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Jackson M. Dunckel, AMG Advanced Metallurgical Group N.V. – CFO & Member of Management Board [13]

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Yes. Thank you, Krishan. We had guided originally to $250 million. We would revise that for the full year of 2020 to $200 million. Obviously, that is dominated by Cambridge II.

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [14]

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And Cambridge II is fully on time and on budget as much as we can state such a statement, and we are not revising in any way our time schedule.

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Krishan M. Agarwal, Citigroup Inc, Research Division – VP & Analyst [15]

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Okay. The final question, if I can ask to Dr. Schimmelbusch. There are some incremental news flow about the vanadium supply disruption, particularly in South Africa. I mean, is there any kind of an updated view in the balance of the market given the COVID uncertainties and the supply disruption?

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [16]

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Well, as far as we know, the vanadium supply disruptions in South Africa intended to be or expected to be temporary. There are also supply disruptions expected and happening in China, manifested in the decline of volatility and the decline of exports from China. Other primary producers are temporarily under care maintenance. So the vanadium supply picture is not expanding, and the market is stable around a low level, a very low level. It is to be expected that over time that will be corrected.

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Operator [17]

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We’ll take our next question.

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Frank Claassen, Banque Degroof Petercam S.A., Research Division – Analyst [18]

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Yes. This is Frank Claassen of Degroof Petercam. Two questions, please. First of all, on Cambridge II. Given the drop in the low end on the oil price, what is the risk that could lead to, let’s say, halt or lower production of the Canadian oil sands, and hence, less availability of spent catalysts? So in other words, how secure is your input stream for the new Ohio plant? Some words on that, please? And then secondly, I was surprised to see such a strong order intake at Technologies. What is the risk that, yes, there will be orders pushed out or canceled, given the, let’s say, terrible situation where the aerospace industry is in now?

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [19]

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The supply situation for spent catalyst is in a very healthy state and development irrespective of the oil price. The Canadian operation, which is one of our suppliers, is a very large forward integrated petrochemical producer, which is very profitable, even under the present oil price scenario. The expansion of our operations rests on a whole variety of contracts, which are either in place or under price negotiation. There are refineries going up, new refineries, state-of-the-art refineries, obviously, in the Middle East. The expectation, as a function of that, is that the supplier of spent catalyst is a growth industry, starting very soon with start-ups of those refineries which — and we are in negotiations with all of them. And that is, of course, the benefit of our joint venture with Shell, which is a supplier of fresh catalysts to all these refineries, establishing a very close relationship. So our planning for our expansion is secure. And that also covers the new plant in Saudi Arabia.

The order intake, yes, the order intake. When we have an order intake, there is no cancellation clause. Otherwise, we book it not as order. An order cannot be booked in order backlog, and it’s legally binding. Hence it’s being executed.

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Frank Claassen, Banque Degroof Petercam S.A., Research Division – Analyst [20]

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But is there a risk that it could be, let’s say, spread out that the Airbuses and Boeing’s of this world ask you to deliver these furnaces later or next year maybe? Or…

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [21]

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But Airbus and Boeing, first of all, are not our customers. Our customers is: a, the engine producers; and b, the suppliers of the engine producers. And we don’t have any indication that such a thing is happening. And if it happens, we will negotiate customer-by-customer related situations. But it is not happening. And it is, as I said, legally binding contract. So the money is owed, money is owed. And if somebody wants to postpone, then, of course, the appropriate payments are being the cornerstone of any negotiation.

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Operator [22]

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We’ll take our next question.

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Martijn P. den Drijver, ABN AMRO Bank N.V., Research Division – Analyst [23]

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Yes. Martijn den Drijver, ABN AMRO. The first question is on the dividend, which you’ve maintained. Can you please run us through the thought process of maintaining that dividend given the uncertainty generated by COVID-19? That would be my first question. And obviously, not only COVID-19, but the aerospace developments? The the second question is: Could you perhaps share with regards to a cost reduction program, whether there is a target that we should take into account for the next couple of quarters or maybe for 2020? And the third question is on CapEx. I understand there’s an updated guidance. Could you maybe perhaps give us some guidance as to the phasing of that CapEx for the next couple of quarters? The fourth question. You haven’t specifically mentioned it, but there have been some remarks. Have you resumed supply of lithium to your strategic customer? And then my final question for now. What has been the contribution of ISA, the acquisition of late 2019 in the first quarter in terms of sales and EBITDA, so we can get a proper sense of the performance of AMG Technologies?

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [24]

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Dividend. Our dividend policy has not been changed, whether later in the year when the next dividend decision comes up. The Supervisory Board will evaluate all these factors, which are necessary to be evaluated in making such a decision. With regard cost reduction. There is no target. There is a moving target depending on the development of the market into which we sell our products. And that is an exercise which is continuously updated on a weekly basis. CapEx, you want to say say something, Jackson?

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Jackson M. Dunckel, AMG Advanced Metallurgical Group N.V. – CFO & Member of Management Board [25]

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So CapEx, I think the phasing — so we’ve got about $60 million a quarter for the next 3 quarters. I would probably phase that more towards the second half, i.e., lighter than $60 million in the second quarter and more expensive in the second half. A lot of this, of course, depends upon subsupplier payments by our vanadium projects. So some of the timing is a little bit out of our control, but that’s — that would be my guidance.

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [26]

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And on lithium, we have restarted our lithium operation after temporary shutdown last year. And we are in full production and shipping to 3 customers our production.

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Frank Claassen, Banque Degroof Petercam S.A., Research Division – Analyst [27]

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And that was — the full production was already at the end of the quarter? Or during the latter phase of the quarter? Or only early April? Just to clarify that.

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [28]

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We started, I think, 2/3 of the month — 2/3 of the quarter was in production full, approximately. So we started in the beginning of the quarter.

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Frank Claassen, Banque Degroof Petercam S.A., Research Division – Analyst [29]

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Okay. And then a final question on the contribution of ISA?

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [30]

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Not material. The ISA is, of course delivering into the aerospace industry for vanadium aluminum. And those commodities are, of course, not in exuberant demand.

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Frank Claassen, Banque Degroof Petercam S.A., Research Division – Analyst [31]

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Okay. Just one follow-up on the CapEx. Just to make sure. The CapEx on Ohio II may not always run in conjunction with what’s the — the trust sees as a milestone or a certain threshold. What I’m trying to ask is, is there — for the end of the quarter, perhaps a receivable on the balance sheet of AMG to the trust that’s managing the restricted cash?

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Jackson M. Dunckel, AMG Advanced Metallurgical Group N.V. – CFO & Member of Management Board [32]

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No. There — if you look at the balance sheet, there’s restricted cash, so — carved out. So you can see it on restricted cash of $295,495,000. That restricted cash is 100% municipal trust.

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Frank Claassen, Banque Degroof Petercam S.A., Research Division – Analyst [33]

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Does it ever occur — is it ever possible that you would have a receivable at the end of the quarter, given the different phasing of CapEx?

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Jackson M. Dunckel, AMG Advanced Metallurgical Group N.V. – CFO & Member of Management Board [34]

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Yes. Certainly, certainly. Not necessarily in this quarter, though.

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [35]

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Since you had another follow-up question, I have another follow-up answer. On ISA, we acquired ISA as a small, extremely strategically important acquisition. And there are integration — there’s an integration underway into our operations. And it’s an interesting consolidation in 2 product areas in vanadium aluminum, which is going to the aerospace industry, that’s the master alloy; and in chromium. ISA is the traditional producer of silicon chrome metal product. And we, of course, are chrome metal producer in the U.K., and we are targeting the U.S. market, and the combination of those units will be strategically of great importance in this regard.

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Operator [36]

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(Operator Instructions) And we’ll hear from our next caller.

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Stijn Demeester, ING Groep N.V., Research Division – Research Analyst [37]

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Yes. Stijn Demeester from ING. Three questions, if I may. So the first one is on vanadium. You have been vocal in the past about an expected decrease in recycling fees. Can you give a view on when this should be visible in your results? Then second question on lithium expansion in Germany. Can you give an update on the funding there of that expansion? And whether you expect to be successful in obtaining subsidies to fund this project? Then a last question is on COVID-19 and sort of the broader impact on aerospace markets. Do you think this situation can fundamentally change or derail the growth dynamic in the aerospace market? And/or in other words, do you think once COVID-19 is behind us, we should see a return to normal? Or is there something fundamentally different that you see? These are my questions.

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [38]

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Vanadium by 2021.

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Stijn Demeester, ING Groep N.V., Research Division – Research Analyst [39]

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Okay that’s clear.

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [40]

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Yes. And I don’t know the month in 2021, but it’s…

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Jackson M. Dunckel, AMG Advanced Metallurgical Group N.V. – CFO & Member of Management Board [41]

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It’s at the end of 2020, but it takes a while to obviously run through.

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [42]

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That’s why, since I am a conservative person, I said, 2021. And on lithium subsidies, such projects obviously attract subsidies. And on aerospace, we are very hesitant to comment on that, obviously because of the enormous insecurity. I remind you, in February, we mandated the banking consortium for the IPO, Citigroup and ABN AMRO, and everybody was aligned to time schedule. That sounds from the present point of view, after what’s happening with the airlines, starting with the airlines, starting with Airbus, starting with Boeing, a little bit awkward. And obviously, nobody does a constructive equity-type action in that market. Long term, nobody knows. But I personally, of course, think that the — and I have talked about this, that the big trend behind the long-dated order book of the like 8, 10 years of the aerospace industry, which was making it such an attractive destination for investment capital is, of course, melting away. And the question is: Is the mobility trend, which was fueling this attractiveness, interrupted? And that — and how long will it take to resume? And that’s anybody’s guess. And it’s not — it’s also far beyond economics because of the political implications when you think about the relationship with U.S. and China, for example and the amount of — the percentage of Chinese in this mobility trend, Chinese is higher (inaudible). So this is a very complex question. And I think we have to wait 0.5 years or a year to be more intelligent in giving an answer.

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Stijn Demeester, ING Groep N.V., Research Division – Research Analyst [43]

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Okay. This was helpful. Maybe in relation to that, are you already planning to look at other markets than aerospace for growth for the future? Or is it too soon to sort of really address?

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [44]

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Well, our order intake is resting on a lot of industries, including additive manufacturing, in a big way, including powder metallurgy for a variety of applications, including recycling, which is a big topic for cost, for efficiency and for also for CO2 reduction. Close loop, we are a leader in circular economy. So a variety of projects in that area. We are also targeting markets which have nothing to do with automotive and aerospace. So that is ongoing. Of course, we will have to reflect postponement of otherwise solid order prospects in the aerospace industry. That’s clear. But diversification is underway, which was a big topic, by the way, in our Supervisory Board meeting, which happened today, where we mapped out the strategy how to keep our growth going in the medium and long term despite of the aerospace slowdown.

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Operator [45]

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And moving on, we’ll take our next question.

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Unidentified Analyst, [46]

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Martin (inaudible), a couple of questions from my end. First of all, with the postponement of the IPO. You’re going to miss certain income from selling shares. Will this will this endanger your growth plans in the near future?

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [47]

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No, I don’t think so.

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Unidentified Analyst, [48]

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Okay. Second question. Your trade receivable was relatively high. Could you put some color to that? And also, additionally to that, could you — do you see some changes in your client payment behavior?

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Jackson M. Dunckel, AMG Advanced Metallurgical Group N.V. – CFO & Member of Management Board [49]

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Thanks for that, Martin. We, given the situation, are monitoring our trade receivables every week for current. And I can tell you that we are completely current on all of our receivables today. And the rationale behind the increase is really a certain amount of seasonality. So we do experience a significant amount of working capital inflow in the fourth quarter and a significant amount of working capital outflow in the fourth quarter — or in the first quarter, excuse me. So part of that is seasonal. And part of it is changing payment terms with a specific customer that’s going to reverse in the second quarter. We would expect those numbers to be back down, again, in the second quarter.

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Unidentified Analyst, [50]

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Then concerning your order intake at Engineering. When presenting the full year figures, you mentioned that in January, you hit a 10-year record in this respect. We have come down a little bit, but still it’s at a high level. But could you give some color what has happened in the month of March and April with your order intake?

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [51]

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Actually, we are only commenting on the quarter.

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Jackson M. Dunckel, AMG Advanced Metallurgical Group N.V. – CFO & Member of Management Board [52]

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Yes. The monthly intakes are quite volatile. So the only reason we mentioned the January 1 was in the context of ongoing strength, not per se that any one month is noteworthy than another.

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [53]

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It would be wrong to draw forward-looking conclusions from order intake in a month. So I’m not saying that the month of April was low. I’m saying it is wrong to — this is a longer-term business, and the volatility between periods is rather high.

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Unidentified Analyst, [54]

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Right, very right. and then lastly, could you put some color on your remarks stating our financial results reflect the lowest price environment we are experiencing?

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [55]

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A low…

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Jackson M. Dunckel, AMG Advanced Metallurgical Group N.V. – CFO & Member of Management Board [56]

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the lowest price environment commentary that we had in our…

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [57]

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Well, as Eric Jackson has commented, all our — actually, it’s a good question. All our units are — 9 units are EBITDA positive in 2019, and in 2020, as foreseen now, despite the fact that literally all applicable prices are at their lowest level historically, not 10 years, historically. That means that we are a low-cost producer. And when you are a portfolio of low-cost production activities, lowest-cost production activities, that’s another word for stability. When you are the lowest-cost producer in one activity, of course, that’s great, but if it’s a portfolio of lowest cost, that’s another word for stability.

And it is interesting, we, of course, follow other producers of single-commodity areas, which are not a portfolio but [single] and are listed. And when you do that, you come to the conclusion, we are the lowest-cost producer. Now in some areas, that is very clear, and that is the recycling area in vanadium. And that is stable, of course, by the recycling fees, which we are getting, which you can address as negative mining costs. But putting this aside, we are, even in areas where we are competing on a one-to-one basis, not having a recycling advantage, we are the low-cost producer.

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Operator [58]

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There are no additional questions in the queue. This concludes AMG’s conference call. Thank you for your participation. And you may now disconnect.

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Heinz C. Schimmelbusch, AMG Advanced Metallurgical Group N.V. – Chairman of the Management Board & CEO [59]

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Thank you very much.

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Jackson M. Dunckel, AMG Advanced Metallurgical Group N.V. – CFO & Member of Management Board [60]

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Thank you, everybody.