May 17 2005
AMR Technologies Inc. today announced its results for the period ending March 31, 2005. Unless otherwise specified, all currency amounts are expressed in U.S. dollars.
For the period ending March 31, 2005, the Company reported record revenue of $16.2 million compared to revenue of $11.8 million for the same period last year. Rare Earths recorded a 43 percent increase in sales in the quarter to $12.9 million while sales in the Zirconium business almost doubled to $2.7 million. The Magnetics business, however, had a disappointing quarter with sales at half of last year’s level.
The quarter recorded a profit of $47,000 compared to a loss of $143,000 in the corresponding period last year. Operating income for the quarter in Rare Earths increased from $768,000 in the first quarter of 2004 to $1,238,000 and the Zirconium business contributed $411,000 compared to $123,000 in the previous year. The Magnetics business, however, showed a reversal with a loss in the quarter of $234,000 from a profit of $201,000 last year.
Operating margins in the quarter were adversely affected by increases in raw material prices. Prices for rare earth carbonates, rare earth clays, zircon, zirconium oxychloride, hydrochloric acid, nitric acid and oxalic acid all increased in the quarter. Further, transportation and power costs in China also increased.
Peter Gundy, Chairman and CEO, stated “We believe these higher input costs will continue and have raised prices for some of our products to offset the cost increases. Also it was recently announced that the 5% VAT credit on all rare earth exports from China will be revoked with effect from May 1, 2005. We have informed our international customers of this change and are currently negotiating with them on price increases.
In the quarter, we made progress in rolling out our high value advanced multi-component oxide line of products developed for the automotive catalyst and other high-tech markets. This resulted in record shipments and revenue of $2.7 million from our Zirconium business for the quarter. We are working on further qualifications with our customers and are confident that these new products can become the benchmark in the industry. Our experience has been that once they are secured, they can generate sustainable revenue growth for AMR We are optimistic that substantial sales revenue can be derived from these products during the next three years. To this end, we completed a significant capacity expansion in the first quarter of 2005 and are planning another expansion in response to strong customer feedback and anticipated demand as we expect to be running out of capacity by year end.
Shipments of Rare Earths for the quarter exceeded 1,130 tonnes with a total sales value of $12.9 million. However, margins were adversely affected by a combination of product mix and increase in material and production costs. We expect margins to improve due to better product mix for the rest of the year.
The Magnetics business had a poor quarter which we believe reflected a general industry slowdown caused by inventory adjustments in the supply chain. Also, first quarter Magnetic results were seasonally lower as a result of customers in China shutting down their production lines for the Lunar New Year holiday. We expect sales to improve throughout the year.
During the quarter we commenced legal action in the Ontario Superior Court of Justice against Lynas Corporation Ltd, one of our shareholders, in connection with the acquisition of AMR shares by another shareholder which we believed may have been acting jointly or in concert with Lynas in compiling a significant block of AMR shares in a manner that does not comply with the take-over bid provisions of Ontario's Securities Act. In order to ensure that the interests of all AMR shareholders are protected, the application is seeking an order prohibiting Lynas from exercising the voting rights attached to its shares. The application was heard on April 1, 2005 and on April 6, 2005 the court ordered that the application proceed to a trial of issue. A three day trial has been scheduled to commence on July 25, 2005.
The operating environment has yet to set a clear and sustainable trend for the year, particularly in the electronics and high-tech sectors for which our sales largely depend. The steps we are currently taking to increase prices should reduce the impact of operating costs going forward. Shareholders can be assured that our management regards the effort to improve margins, lower operating costs and enhance shareholder value a continuing process.”
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