CVTech Group Inc. reports results for 3rd quarter of 2011

  • Consolidated revenues up 12.9% to $62.7 million
  • EBITDA of $4.7 million or 7.5% of revenues
  • Cash flow from operating activities, before changes in working capital items, up 3.3% to $5.3 million
  • Stable order backlog of $308 million

DRUMMONDVILLE, QC, Nov. 10, 2011 /CNW Telbec/ - CVTech Group Inc. ("CVTech" or the "Corporation") (TSX: CVT) today announced results for its third quarter ended September 30, 2011. These results are presented in accordance with International Financial Reporting Standards ("IFRS") and data for the corresponding period of the previous year have been restated. All amounts are in Canadian dollars unless otherwise indicated.

THIRD-QUARTER RESULTS
Consolidated revenues were $62.7 million, up 12.9% from $55.5 million in the third quarter of 2010. This increase reflects mainly revenues of $12.6 million related to natural disasters that occurred during the quarter. On the other hand, the conversion effect resulting from fluctuations in the value of the Canadian dollar reduced the value of consolidated revenues denominated in foreign currencies by approximately $2.5 million relative to the same period a year earlier.

Consolidated earnings before interest, taxes, depreciation and amortization ("EBITDA") were $4.7 million or 7.5% of revenues in the third quarter of 2011 compared to $5.9 million or 10.7% of revenues in the third quarter of 2010. It should be noted that EBITDA for the quarter ended September 30, 2010 included approximately $1.0 million related to revenues from a large contract that could not be recorded previously. In addition, the quarter ended September 30, 2011 resulted in a foreign exchange loss of $82,000, as opposed to a foreign exchange gain of $324,000 in the quarter ended September 30, 2010.

Profit for the period therefore reached $1.1 million or $0.02 per diluted share, compared to $2.1 million or $0.03 per diluted share for the quarter ended September 30, 2010. However, cash flow from operating activities, before changes in working capital items, increased 3.3% to $5.3 million.

The Corporation's order backlog as at September 30, 2011 amounted to approximately $308 million, relatively stable in comparison with the end of the previous quarter.

 
Financial highlights Three months ended September 30   Nine months ended September 30
(in thousands of dollars, except per-share data) 2011   2010     2011   2010  
Revenues 62,658   55,479     180,872   190,191  
EBITDA 4,671   5,916     15,315   17,860  
Profit for the period 1,110   2,083     4,532   6,435  
  Per share - basic and diluted ($) 0.02   0.03     0.06   0.09  
Weighted average number of shares outstanding (basic, in thousands) 72,514   73,020     72,588   72,817  

SEGMENT RESULTS
Revenues of the Energy segment increased 14.5% to $58.7 million in the third quarter of 2011 from $51.3 million in the third quarter of 2010. This increase reflects revenues of $12.6 million related to natural disasters. However, this emergency work required temporary reassignment of certain employees, which delayed the execution of regular contracts. The recording of an estimated $5.8 million in revenue from the latter contracts was therefore deferred to later periods. Also, the conversion effect resulting from fluctuations in the value of the Canadian dollar reduced the value of U.S.-dollar-denominated revenues by $2.5 million. The Corporation continues to note some slowdown in the award of contracts in the U.S. as a result of economic uncertainty, which has intensified competitive pressures and reduced the profitability of electrical service suppliers. In addition, the reassignment of employees reduced efficiency in the execution of regular contracts. Consequently, EBITDA of the Energy segment was $4.0 million, or 6.8% of revenues, compared to $5.4 million, or 10.6% of revenues, a year earlier.

Revenues of the CVT systems and related products segment were $3.9 million in the third quarter of 2011, down slightly from $4.2 million a year earlier. Such decrease is attributable to a decline in demand for the Corporation's systems due to the discretionary nature of purchases of the products in which these systems are incorporated. EBITDA nevertheless increased to $699,000, or 17.8% or revenues, from $493,000, or 11.7% of revenues, a year earlier, as a result of reduced selling, general and administrative expenses.

"Our operating flexibility allowed our teams to move quickly to serve customers in response to storms that affected some of our main markets," said André Laramée, President and Chief Executive Officer of CVTech. "At the same time, delays in the award of large contracts in the U.S. have resulted in increased competitive pressures, as suppliers of electrical services attempt to preserve their market share. However, the strong reputation of our subsidiaries has enabled them to maintain an active presence in our strategic markets and to keep our order backlog relatively stable."

NINE-MONTH RESULTS
For the nine months ended September 30, 2011, revenues were $180.9 million, compared to $190.2 million in the nine months ended September 30, 2010. The reduction is explained by revenues of $7.1 million from the GLR-Thiro G.P. consortium recorded in 2010, versus no revenue from this consortium in 2011. The conversion effect resulting from fluctuations in the value of the Canadian dollar reduced the value of consolidated revenues denominated in foreign currencies by approximately $6.7 million in the first nine months of 2011.

EBITDA in the first nine months of 2011 was $15.3 million, or 8.5% of revenues, versus $17.9 million, or 9.4% of revenues, a year earlier. Profit for the nine-month period of 2011 was $4.5 million, or $0.06 per diluted share, compared to $6.4 million, or $0.09 per diluted share, a year earlier. Cash flow from operating activities, before changes in working capital items, was $14.0 million, versus $16.9 million a year earlier.

SOUND FINANCIAL POSITION
As at September 30, 2011, CVTech's financial position remained sound, with cash of $910,000 and long-term debt, including the current portion, of $35.2 million. However, since the aforementioned natural disasters occurred in the second half of the quarter, the Corporation had increased recourse to bank loans to finance working capital. As a result, the ratio of net debt to equity was 0.58 at September 30, 2011 compared to 0.48 three months earlier.

OUTLOOK
"Despite hesitant economic conditions, our subsidiaries remain well-positioned to further increase their penetration of market niches with high growth potential, such as services related to renewable energy. In addition, our target markets remain fragmented and CVTech's healthy financial position allows it to actively remain on the lookout for further strategic acquisitions that will expand its service offering and geographical scope," Mr. Laramée concluded.

OVERVIEW OF THE CORPORATION
CVTech is a management company operating in two major sectors. Through Thirau ltée and its subsidiary Thirau LLC, the Corporation provides services to the electric power industry for the maintenance of transmission and distribution lines, primarily in Quebec and the eastern United States. Another Thirau ltée subsidiary, J.J.L. Déboisement inc., specializes in control of vegetation surrounding power lines and in clearing rights of way. Thirau LLC's wholly owned subsidiary Riggs Distler & Company, Inc. is a leading provider of maintenance and construction services to the utility and heavy industrial markets. In the CVT systems and related products segment, the Corporation, through CVTech-IBC Inc., designs, manufactures and sells continuously variable transmission systems, or CVT systems. CVTech-AAB inc. specializes in rebuilding crankshafts and cylinders and in distributing engine parts.

NON-IFRS MEASURE
EBITDA is a measure that has no standardized meaning prescribed by IFRS and is thus considered to be a non-IFRS measure. Therefore, this measure may not be comparable to similar measures presented by other issuers. This measure is presented and described in this release in order to provide additional information regarding the Corporation's liquidity and its ability to generate funds to finance its operations.

FORWARD-LOOKING STATEMENTS
This document may contain forward-looking statements that reflect management's current expectations regarding future events. Forward-looking statements are based on a number of factors and include risks and uncertainties. Actual results may differ from forecast results. Management has no obligation beyond what is required under the law to update or revise forward-looking statements pursuant to new information or future events.

Further information regarding CVTech is available in the SEDAR database (www.sedar.com) and on the Corporation's website at www.cvtech.ca.

 

SOURCE CVTECH GROUP INC.

For further information:

André Laramée, MBA 
President and Chief Executive Officer 
819-479-7771 
a.laramee@cvtech.ca 
  Mario Trahan, CMA 
Chief Financial Officer 
819-479-7771 
m.trahan@cvtech.ca 
  MaisonBrison Communications
Martin Goulet, CFA
514-731-0000
martin@maisonbrison.com

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