AMG Critical Materials N : Halfjaarlijkse financiële verslaggeving

AMG Critical Materials N.V.

Condensed Interim Consolidated Financial Statements

(unaudited)

June 30, 2023

Semi-Annual Financial Report

This report contains the semi-annual financial report of AMG Critical Materials N.V. ("AMG" or "the Company"), a Company which was incorporated in the Netherlands as a public limited liability company on November 21, 2006. The address of the Company's registered office is WTC Amsterdam, Toren C, Strawinskylaan 1343, 1077 XX Amsterdam.

The semi-annual report for the six months ended June 30, 2023 consists of the responsibility statement by the Company's Management Board, the semi-annual management report and the condensed consolidated semi-annual financial statements. The information in this semi-annual financial report is unaudited.

The Management Board of the Company hereby declares that to the best of their knowledge, the semi-annual financial statements, which have been prepared in accordance with IAS 34, "Interim Financial Reporting" as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the entities included in the consolidation taken as a whole. The half-year management board report gives a true and fair view of the important events of the past six-month period and their impact on the half-year financial statements, as well as the principal risks and uncertainties for the six-month period to come, and the most important related party transactions.

/s/ Heinz C. Schimmelbusch	/s/ Jackson Dunckel	/s/ Eric E. Jackson
Chief Executive Officer	Chief Financial Officer	Chief Operating Officer

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Management Report

AMG is a global critical materials company at the forefront of CO2 reduction trends. AMG produces highly engineered specialty metals and mineral products and provides related vacuum furnace systems and services to the transportation, infrastructure, energy, and specialty metals & chemicals end markets. AMG is organized under three reportable segments: AMG Clean Energy Materials, AMG Critical Minerals and AMG Critical Materials Technologies. AMG Clean Energy Materials is comprised of the Vanadium, Lithium, and Tantalum business units. AMG Critical Minerals is comprised of the Graphite, Silicon, and Antimony business units. AMG Critical Materials Technologies is comprised of the Engineering, Titanium and Chrome business units.

AMG Clean Energy Materials combines our recycling and mining operations producing materials for infrastructure and energy storage solutions while reducing the CO2 footprint of both suppliers and customers. AMG Clean Energy Materials spans the vanadium, lithium, and tantalum value chains. AMG Clean Energy Materials has major production facilities in the US, Brazil and Germany. AMG Critical Minerals consists of our mineral processing operations in graphite, silicon metal and antimony. AMG Critical Materials Technologies combines our leading vacuum furnace technology line with high-purity materials serving global leaders in the aerospace sector.

With approximately 3,600 employees at June 30, 2023, AMG operates globally with production facilities in Germany, the United Kingdom, France, the United States, China, Mexico, Brazil, India, Sri Lanka, and Mozambique, and has sales and customer service offices in Japan.

AMG generated the highest profit attributable to shareholders in our history in the first half of 2023 which almost doubled from our first half of 2022. This outstanding result is mainly driven by our AMG Clean Energy Materials segment, specifically AMG Lithium and its Brazilian operation.

AMG Clean Energy Materials benefited from higher sales volumes and pricing of lithium concentrate in the first half of 2023. AMG Clean Energy Materials is the segment which is and will continue receiving the most capital investment within AMG, and the capital expenditures of $78 million in the first half of 2023 mainly reflect our investment into the battery-grade lithium hydroxide plant in Bitterfeld, Germany and expansion of our lithium activities globally.

AMG Critical Minerals had lower revenue compared to the same period in the prior year due to lower volumes across the segment largely driven by the silicon metal plant care and maintenance plan for the first two months of the year, followed by reduced operations of only a single furnace during the first half of 2023.

AMG Critical Materials Technologies had higher revenue compared to the same period in the prior year. This improvement was driven by strong revenues in our engineering unit, as well as higher sales volumes of titanium alloys and chrome metal, partially offset by lower chrome metal pricing. Order backlog was $337 million as of June 30, 2023, which is the highest backlog in the Company's history. The Company signed $243 million in new orders during the first half of 2023, representing a 1.87x book to bill ratio. The first half of 2023 benefited from strong orders of remelting, turbine blade, heat treatment and induction furnaces.

AMG's selling, general and administrative expenses for the first half 2023 were $90 million versus $74 million in the comparative period in 2022. This increase was primarily driven by higher personnel costs due to additional hiring in our Lithium, Engineering, and LIVA businesses. It was also driven by a one-time pension expense of $7 million due to the restructuring of executive employee benefit plans.

AMG's net finance costs were $14 million in the first half of 2023 compared to $21 million in the first half of 2022. This decrease was mainly driven by foreign exchange gains of $2 million in the first half of 2023 as compared to foreign exchange losses of $8 million in the comparable prior period. The Company also benefited from higher interest income earned in 2023 due to the overall increase in global interest rates, and higher cash and cash equivalents balances relative to the comparable prior period.

AMG recorded an income tax expense of $62 million in first half of 2023, compared to $22 million in the same period in 2022. This variance was mainly driven by higher profitability in AMG Lithium at its Brazil operation. AMG paid taxes of $56 million in the first half 2023, compared to $13 million in the first half of 2022 due to the aforementioned higher profitability.

Net profit attributable to shareholders for the first half of 2023 of $99 million was driven by the higher revenue noted above offset partially by higher selling, general, and administrative expenses and higher income tax expense relative to the first half of the prior year.

Cash from operating activities was $153 million in the first half of 2023, driven by the higher net profit and offset partially by higher income tax payments.

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AMG's annualized return on capital employed for the first half of 2023 was 35.7%, as compared to 25.5% for the same period in 2022, reflecting the increased profitability during the current period.

AMG finished the first half of 2023 with $280 million of net debt. This decrease was mainly due to the benefit of higher cash balances as a result of the strong operating cash flows from operating activities.

AMG continued to maintain a strong balance sheet and adequate sources of liquidity during the year. As of June 30, 2023, AMG had $391 million of unrestricted cash and total liquidity of $586 million. With this cash on hand and strong projected operating cash flows, AMG believes it can fully fund its current approved strategic projects. Additionally, AMG executed a mandate letter on July 25, 2023 with KfW IPEX-Bank GmbH and Citigroup, Inc. ("Citi"), which will serve as an additional source of financing for the construction of our proposed technical-grade lithium chemical plant in Brazil.

Management's objectives consistently focus on delivering positive operational results as well as generating cash to be able to support expansion, research and development, and vertical integration strategies. These objectives are measured by the Company primarily using adjusted EBITDA and cash from operating activities. EBITDA, adjusted for exceptional items, is a measure used by management as a proxy for operating profit. Short-term executive incentive plans have adjusted EBITDA and cash flow from operations targets.

Adjusted EBITDA is not a defined performance measure in IFRS Standards. The Company's definition of adjusted EBITDA may not be comparable with similarly titled performance measures and disclosures by other entities. The following table shows a reconciliation of the Company's net profit to adjusted EBITDA.

Profit for the period to adjusted EBITDA reconciliation
	For the six months ended
	June 30,
	2023	2022
Profit for the period	100,020	59,763
Income tax expense	62,479	21,667
Net finance cost	13,899	21,130
Equity-settledshare-based payment transactions	2,964	2,752
Restructuring expense	363	182
Pension adjustment	6,700	-
Silicon's partial closure	185	-
Inventory cost adjustment	4,188	-
Asset impairment reversal	(767)	-
Strategic project expense (1)	7,101	7,903
Share of loss of associates	1,792	500
Others	-	99
Adjusted EBIT	198,924	113,996
Depreciation and amortization	26,640	21,890
Adjusted EBITDA	225,564	135,886

1. The Company is in the initial development and ramp-up phases for several strategic expansion projects, including AMG Vanadium's expansion project, the joint venture with Shell Catalysts & Technologies, the LIVA Battery System, and the lithium expansion in Germany, which incurred project expenses during the the first half of 2023 but are not yet operational. AMG is adjusting EBITDA for these exceptional charges.

Risks and Uncertainties

In our 2022 Annual Report, we have described certain risk categories and risk factors which could have a material adverse effect on our financial position and results. These risks include the COVID-19 pandemic, metal and mineral price volatility, mining, customer, supply, project execution, legal and regulatory, climate change, currency, competition, product quality, safety and liability, financing, business interruption, and information technology. During the first half of 2023, the global markets have

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experienced significant risks related to the rise of inflation in many countries, instability within the banking sector, higher interest rates, and elevated energy prices resulting from the geopolitical environment. These macroeconomic issues have particularly impacted our Asian and European geographic end markets, and could expand into a global recessionary environment. While the Company has enacted measures to mitigate these risks including long-term,index-based sales contracts, interest rate swaps and energy contract hedges, the future consequences of these economic uncertainties cannot currently be estimated with any accuracy. Apart from these factors, the Company believes that the risks identified for the second half of 2023 are in line with the risks that AMG presented in its 2022 Annual Report.

Additional risks currently not known to us, or currently believed not to be material, could ultimately have a material impact on our business, objectives, revenues, income, assets, liquidity, or capital resources.

Operational Outlook

Given the global economic uncertainty and the slowdown in China, current spot prices across AMG's critical materials portfolio are significantly below the prices we experienced when we announced our initial guidance for 2023 in November 2022. The price of lithium carbonate in November 2022, the date of our $400 million EBITDA guidance, has almost halved and our other relevant portfolio prices are down an average of 25%.

Therefore, we have changed our full year EBITDA guidance for 2023 from "exceeding $400 million in EBITDA" to "a range between $350 million to $380 million in EBITDA." An EBITDA in this range represents the highest EBITDA in the history of AMG.

Regarding our long-term guidance, we are extremely pleased with the advancement of our strategic projects. We are moving forward with our lithium concentrate expansion in Brazil. We've signed a mandate letter to fund the chemical upgrader in Brazil, and our lithium hydroxide refinery in Bitterfeld, Germany, is under construction, with commissioning for the first 20,000-ton module expected in the fourth quarter of 2023.

These transformational projects in lithium, our newly complete ferrovanadium spent catalyst recycling facility in Ohio, and the continued ramp-up in our AMG Critical Materials Technologies segment will drive increased volumes across our Clean Energy Materials segment and confirm our confidence in our long-term guidance. Our long-term guidance therefore remains unchanged at an EBITDA level of $650 million, or more, in 5 years, or earlier.

AMG anticipates the Company will increase overall staffing which was approximately 3,400 at December 31, 2022 by 15% to 20% at the end of 2023 due to the hiring associated with the ramp-up of the vanadium and lithium expansion projects in our Clean Energy Materials segment as well as hiring to support the aerospace recovery in our Critical Materials Technologies segment.

Capital expenditures for 2023 are expected to be between $175 million and $200 million mainly driven by the expansion of our lithium concentrate facility in Brazil and expenditures related to the construction of the lithium hydroxide plant in Germany.

With regard to financing in 2023, AMG has signed a mandate letter to fund a chemical upgrader in Brazil as previously discussed herein. Although we look to consistently optimize our financial structure, our current liquidity can fully fund all of the remaining approved capital expansion projects mentioned above.

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