WINNIPEG, Aug. 28 /CNW/ - Empire Industries Ltd. (TSX-V: EIL) ("Empire"
or the "Company"), today announced its unaudited consolidated financial
results for its second quarter and six months ended June 30, 2009. The
unaudited consolidated financial statements and Management's Discussion and
Analysis for the first quarter are available on Empire's website at
www.empind.com and have been filed on SEDAR.
Second Quarter Highlights:
- Revenue decreased 34.7% to $28.6 million compared to $43.7 million
- Gross margin was 5.4% of revenue compared to 15.1% of revenue for the
second quarter of last year;
- Operating, general and administrative ("OG&A") expenses declined
22.6% to $4.5 million compared to $5.8 million for the same quarter
- Net Loss from operations was $2.2 million, or $0.02 per share,
compared to a loss of $0.3 million, or $nil per share, for the second
quarter of 2008.
Subsequent to quarter end the Company completed a sale and leaseback of
its Kingsway facility as announced July 31, 2009 and used the proceeds of sale
to repay $8.8 million of debt.
Revenue for the second quarter decreased 34.7% to $28.6 million due to
reductions from both the engineered products and steel fabrication groups. The
engineered products group had lower sales of oilfield equipment as a result of
shifts in seasonal buying patterns as well as an overall reduction in activity
in the oil and gas sector in the quarter due to weak commodity prices. In the
steel fabrication group, larger projects in the first six months of fiscal
2008 were replaced by fewer and smaller projects during the first half of
fiscal 2009 following the contraction and deferral of large construction
projects in the Alberta oil sands.
Gross margin deteriorated to 5.4% of revenue from 15.1% of revenue for
the second quarter of last year. The deterioration arose from higher erection
costs associated with the first cable-stayed bridge (Coast Meridian Overpass)
launched in North America, incorporating the greatest single span ever
launched, as well as lower sales activity relative to underlying fixed
production and indirect overhead expenses.
Despite a $1.3 million reduction in OG&A expenses in the second quarter,
the Company incurred an operating loss of $3.8 million for the quarter
compared to operating income of $0.1 million for the same period last year.
The net loss for the quarter widened to $2.2 million, or $0.02 per share, from
$0.3 million, or $nil per share, a year ago.
Focus on Cash Flow and Managing Costs
"While certainly disappointed by our financial results for the quarter
and the year-to-date, Empire has taken a number of decisive actions to improve
cash flow, contain costs and strengthen its balance sheet," said Guy Nelson,
Chairman and CEO of Empire Industries Ltd. "In light of the economic recession
and the contraction and deferral of large construction projects in western
Canada, we have implemented significant cost reductions throughout the year in
both our engineered products and steel fabrication groups contributing to a
22.6% reduction in OG&A expenses for the quarter and 9% for the year-to-date."
Staff reductions undertaken in late fiscal 2008 as well as further staff
and salary reductions late in the second quarter are expected to contribute to
lower OG&A and cost of sales throughout the balance of fiscal 2009. Additional
cost reductions have been implemented subsequent to quarter end that coincided
with substantial completion of the Coast Meridian Overpass project.
Concurrent with the sale of the Kingsway property subsequent to quarter
end in July 2009, the Company entered into a ten year fixed rate lease with
the purchaser. The fixed rate lease cost under the agreement provides an
initial cash flow saving of about $840,000 per year compared to the former
debt servicing cost associated with the property.
"We remain focused on the long-term growth opportunities inherent in each
of our business segments," said Mr. Nelson. "However, for the remainder of the
year we expect our steel fabrication group to continue to be negatively
impacted by the current contraction and deferral of large construction
projects in western Canada. Our steel fabrication backlog at June 30, 2009 was
about $33 million compared to $46 million at March 31, 2009 although bidding
activity has recently increased. We are confident that when the current
economic contraction subsides, the non-residential construction market in
western Canada will continue its long-term growth trend led in part by the
expected positive impact of federal and provincial infrastructure spending
announcements and in part by the strengthening of commodity prices which are
the central driver of the western Canadian economy. The outlook for our
engineered products group and our aboriginal partnership remains positive for
the balance of fiscal 2009, supported by increasing backlogs and increased
The Company and its board of directors continue to evaluate alternatives
to optimize the value and performance of its steel fabrication group and to
improve free cash flow and liquidity in order to reduce debt and rectify its
previously disclosed covenant breaches. In addition to the cost reduction
steps already taken and the sale and leaseback of the Kingsway facility
completed, options being considered by the Company include the disposition of
additional non-core or redundant assets, further cost containment and cost
reduction, refinancing of certain long-term assets and increases in
About Empire Industries Ltd.
Empire Industries Ltd. adds value to steel through its leading, Western
Canadian engineered products manufacturing and steel fabrication groups and
its Fort McMurray-based strategic partnership in the maintenance services
sector. The Company's business operations are focused on the infrastructure,
commercial and industrial construction marketplace of Western Canada and
select niche markets internationally. Empire's common shares are listed on the
TSX Venture Exchange under the symbol EIL.
This press release contains forward-looking statements, within the
meaning of applicable securities legislation, concerning Empire's business and
affairs. In certain cases, forward-looking statements can be identified by the
use of words such as ''plans'', ''expects'' or ''does not expect'',
''budget'', ''scheduled'', ''estimates'', "forecasts'', ''intends'',
''anticipates'' or variations of such words and phrases or state that certain
actions, events or results ''may'', ''could'', ''would'', ''might'' or ''will
be taken'', ''occur'' or ''be achieved''. These forward looking statements are
based on current expectations, and are naturally subject to uncertainty and
changes in circumstances that may cause actual results to differ materially.
Readers are cautioned not to place undue reliance on such forward-looking
statements. Forward-looking information is provided as of the date of this
press release, and Empire assumes no obligation to update or revise them to
reflect new events or circumstances, except as may be required under
applicable securities laws.
Neither TSX Venture Exchange nor its Regulation Services Provider (as
that term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
For further information:
For further information: please visit our web-site at: www.empind.com or
contact: Guy Nelson, Chairman & CEO, Empire Industries Ltd., Tel: (416)
366-7977, Email: email@example.com; David Carefoot, Chief Financial Officer,
Empire Industries Ltd., Tel: (204) 589-9305, Email: firstname.lastname@example.org;
Trevor Heisler, Investor Relations, The Equicom Group Inc., Tel: (416)
815-0700 x 270, Email: email@example.com