ZCL Composites Reports First Quarter 2014 Financial Results
EDMONTON, May 5, 2014 /CNW/ - ZCL Composites Inc. (TSX: ZCL) today announced financial results for the first quarter ended March 31, 2014.
Q1 2014 compared with Q1 2013
- Revenue of $31.6 million, down $1.2 million or 4% from $32.8 million;
- Net income of $1.4 million or $0.05 per fully diluted share, down $1.2 million or 46% from $2.5 million or $0.09 per fully diluted share;
- Adjusted EBITDA of $3.2 million (10% of revenue), down $1.6 million or 34% from $4.8 million (15% of revenue);
- Backlog of $46.0 million, up $4.7 million or 11% from $41.3 million; and
- Maintain quarterly dividend of $0.035 per share, up $0.01 or 40% from $0.025.
"In the face of the normal seasonal challenges in the first quarter, accentuated by extremely challenging weather conditions across most of North America, our Underground segment delivered solid first quarter results and is poised for a good year," said Ron Bachmeier, President and Chief Executive Officer. "From what we can see so far, we anticipate the second quarter of 2014 may be better overall than the second quarter a year earlier as our Underground segment will benefit from the weather-related shipment delays we experienced in the first quarter."
"As expected, first quarter sales in our Aboveground segment were down compared to a year earlier, however we are seeing signs of increasing activity in both our Oil Sands and industrial chemical markets, signaling longer-term growth. The Aboveground segment backlog is up 14% compared to the same time last year and is up 42% sequentially from the fourth quarter 2013. We anticipate visibility regarding future growth in Corrosion Products for the second half of 2014 and into 2015 to continue to improve and we are encouraged by a strong bidding pipeline that relates to both Oil Sands projects and the industrial chemical sector. Although this bodes well for our long term outlook in the Aboveground segment, we expect to continue to be impacted by variability in these markets throughout the next several quarters."
Revenue for the quarter ended March 31, 2014 was $31.6 million, compared to $32.8 million earned for the first quarter of 2013. Both the Petroleum and Water Products groups were up, but were more than offset by a decline in the Corrosion Products group revenue, as compared to the first quarter of 2013.
Gross profit for the quarter ended March 31, 2014 was $5.2 million, down $1.6 million or 23% from $6.7 million a year earlier. Gross margin of 16% was down four percentage points from 20% of revenue for the first quarter of 2013, with the decrease attributable to the lower revenue in the Aboveground operations which was inadequate to cover the fixed manufacturing cost base of the Aboveground operations.
Net income for the first quarter ended March 31, 2014 was $1.4 million, down $1.2 million or 46% from $2.5 million a year earlier. Earnings per share for the first quarter of 2014 was $0.05, down $0.04 or 44% from $0.09 per share a year earlier.
As of March 31, 2014, backlog was $46.0 million, up $4.7 million or 11% from $41.3 million a year earlier and up $7.1 million or 18% from December 31, 2013. The Aboveground backlog was $1.7 million higher than the balance at March 31, 2013 reflecting improvement in the order activity in the Oil Sands market relative to the prior year. In the Underground segment, compared to the same quarter last year, the US operations saw an increase in backlog of $2.7 million or 12%. Canadian Underground operations backlog was also up 12% over the same quarter of 2013. Within Underground, Water Products backlog was up 24% compared to a year earlier.
At March 31, 2014, ZCL's balance sheet had working capital (current assets less current liabilities) of $49.4 million, up $1.6 million from $47.8 million at December 31, 2013. Net cash increased to $17.1 million, up $1.9 million from $15.1 million at December 31, 2013.
Reflecting our confidence in improving overall performance over the long term, the Board has maintained the dividend level, declaring a quarterly dividend of $0.035 per share. This represents a 40% increase over the $0.025 dividend declared at the same time last year. The dividend will be paid on July 15, 2014, to the shareholders of record as of June 30, 2014.
Priorities for 2014
For 2014, our strategic priorities are directly focused on growth while maintaining profitability under the continuous improvement umbrella. The four key aspects of the 2014 strategic plan include:
- Revenue growth:
- Targeting and engaging expanded sales channels to strategically penetrate existing and emerging markets.
- Increase profitability:
- Continuous improvement in operations by increased use of automation, expanded use of KPIs and leveraging our supply chain to optimize materials management.
- Invest in human capital:
- Continue to use ZCL employee branding to make ZCL the employer of choice.
- Continued focus on safety:
- Implement behavioral change to drive safety improvements.
Summary Financial Results
|For the three months ended||2014||2013||2012|
|(in thousands of dollars,||Mar 31||Dec 31||Sep 30||Jun 30||Mar 31||Dec 31||Sep 30||Jun 30|
|except per share amounts)||$||$||$||$||$||$||$||$|
|Adjusted EBITDA (note 1)||3,159||3,975||8,512||8,316||4,797||5,386||7,910||5,701|
|Basic earnings per share||0.05||0.06||0.17||0.17||0.09||0.10||0.17||0.15|
|Diluted earnings per share||0.05||0.06||0.17||0.17||0.09||0.10||0.16||0.15|
|Adjusted EBITDA per diluted share (note 1)||0.10||0.13||0.28||0.28||0.16||0.18||0.27||0.20|
|Dividends declared per share||0.035||0.03||0.03||0.025||0.025||0.02||0.015||0.01|
|Note 1: Adjusted EBITDA and adjusted EBITDA per diluted share are non-IFRS measures and are defined later in this press release.|
MD&A and Financial Statements
The Company's management's discussion and analysis ("MD&A") and unaudited interim condensed consolidated financial statements for the first quarter ended March 31, 2014 and 2013, are available on Sedar at www.sedar.com and the ZCL website at this link: http://www.zcl.com/investor-relations/financials.html.
ZCL Composites Inc. has scheduled an investor conference call for 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) on Tuesday May 6, 2014, to discuss its financial and operating results for the first quarter ended March 31, 2014.
The conference call will include prepared remarks by ZCL's President and Chief Executive Officer, Ron Bachmeier and by ZCL's Chief Financial Officer, Kathy Demuth. After the prepared remarks, ZCL will accept questions from analysts and institutional investors. The public is invited to listen to the conference call in real time or by replay.
To access the conference call by telephone, please call (647) 427-7450 from the greater Toronto area, or dial toll free 888-231-8191 from elsewhere in North America. An audio webcast may be accessed through the Investor Events tab on the ZCL website at http://www.zcl.com/investor-relations/investor-events.html. Audio replays will be available on the ZCL website shortly after the conclusion of the conference call.
Annual General Meeting
ZCL will be hosting its Annual General Meeting on Friday May 9, 2014, to be held at the Edmonton Hotel and Convention Center. All shareholders and institutional investors are invited to attend this meeting after which we will be hosting a tour of our Edmonton manufacturing facilities.
Note on Backlog
Backlog is defined as the total value of orders that management has assessed as having a high certainty of being performed because of the existence of a contract or purchase order specifying the scope, value and timing of an order. Backlog is a non-IFRS measure and does not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures used by other companies.
Note on Adjusted EBITDA
Adjusted EBITDA is defined as income from operations before finance expense, income taxes, share-based compensation, depreciation of property, plant and equipment, amortization of intangible assets, gains or losses on sale of assets, and impairment of assets.
Note on Adjusted EBITDA per Diluted Share
Adjusted EBITDA per diluted share is defined as adjusted EBITDA divided by weighted average diluted shares outstanding.
Advisory Regarding Forward-Looking Statements
This document contains forward-looking statements under the heading "Outlook" and elsewhere concerning future events or the Company's future performance, including the Company's objectives or expectations for revenue and earnings growth, income taxes as a percentage of pre-tax income, business opportunities in the Petroleum Products, Water Products, Corrosion Products markets, efforts to reduce administrative and production costs, manage production levels, anticipated capital expenditure trends, activity in the petroleum and other industries and markets served by the Company and the sufficiency of cash flows and credit facilities available to cover normal operating and capital expenditures. Forward-looking statements are often, but not always, identified by the use of words such as "seek," "anticipate," "plan," "continue," "estimate," "expect," "may," "will," "project," "predict," "potential," "targeting," "intend," "could," "might," "should," "believe" and similar expressions. Actual events or results may differ materially from those reflected in the Company's forward-looking statements due to a number of known and unknown risks, uncertainties and other factors affecting the Company's business and the industries the Company serves generally.
These factors include, but are not limited to, fluctuations in the level of capital expenditures in the Petroleum Products, Water Products, and Corrosion Products markets, drilling activity and oil and natural gas prices, and other factors that affect demand for the Company's products and services, industry competition, the need to effectively integrate acquired businesses, uncertainties as to the Company's ability to implement its business strategy effectively, political and economic conditions, the Company's ability to attract and retain key personnel, raw material and labour costs, fluctuations in the US dollar, euro and Canadian dollar exchange rates, and other risks and uncertainties described under the heading "Risk Factors" in the Company's most recent Annual Information Form, and elsewhere in this document and other documents filed with Canadian provincial securities authorities. These documents are available to the public at www.sedar.com.
In addition to the factors noted above, management cautions readers that the current economic environment could have a negative impact on the markets in which the Company operates and on the Company's ability to achieve its financial targets. Factors such as continuing global economic uncertainty, tighter lending standards, volatile capital markets, fluctuating commodity prices, and other factors could negatively impact the demand for the Company's products and the Company's ability to grow or sustain revenues and earnings. Fluctuations in conversion rates of the US dollar to Canadian dollar and euro to Canadian dollar have the potential to impact the Company's revenues and earnings.
The Company believes that the expectations reflected in the forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this report should not be unduly relied upon.
The forward-looking statements in this report speak only as of the date of this report. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by the Company or on the Company's behalf, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.
SOURCE ZCL Composites Inc.For further information:
President & CEO
ZCL Composites Inc.
Chief Financial Officer
ZCL Composites Inc.