Exco Technologies Limited - Results for Second Quarter Ended March 31, 2016

  • Sales up over 6% in the quarter
  • AFX acquisition completed
  • Financial position and liquidity remains strong
  • South African operation closed

TORONTO, April 27, 2016 /CNW/ - Exco Technologies Limited (TSX-XTC) today announced results for its second quarter ended March 31, 2016. In addition, the Company announced the quarterly dividend of $0.07 per common share which will be paid on June 30, 2016 to shareholders of record on June 15, 2016.   The dividend is an "eligible dividend" in accordance with the Income Tax Act of Canada. 


Three Months Ended March 31

Six Months Ended March 31

(in $ thousands except per share amounts)






2016

2015

2016

2015

Sales

$133,383

$125,484

$264,284

$245,381

Net income

$8,989

$10,872

$20,817

$20,510

Basic earnings per share

$0.21

$0.26

$0.49

$0.49

Diluted earnings per share

$0.21

$0.26

$0.49

$0.48

Common shares outstanding

42,508,130

42,337,862

42,508,130

42,337,862

Consolidated sales for the second fiscal quarter ended March 31, 2016 were $133.4 million compared to $125.5 million last year – an increase of $7.9 million or 6%. Year-to-date sales were up by $18.9 million or 8%. The materially weaker average Canadian dollar exchange rate in the second quarter compared to last year accounted for $6.8 million and $17.1 million of the consolidated sales growth in the quarter and year-to-date periods respectively. 

The Automotive Solutions segment reported higher sales of $86.3 million in the second quarter – an increase of $9.6 million or 13% from the same quarter last year. Year-to-date, it reported sales of $164.0 million – an increase of $14.9 million or 10% over last year. This reflects higher vehicle production volumes and also market share gains with new product launches at Polydesign in Morocco which services the European market experiencing the strongest growth of the segment's businesses.

The Casting and Extrusion segment reported sales of $47.1 million in the quarter – a slight decrease of $1.7 million or 4% from the same quarter last year. Year-to-date, the segment reported sales of $100 million – an increase of $4.1 million or 4% over last year. This reflected lower demand for moulds in the quarter in the large mould business on certain established engine programs and increased production of moulds for new programs with inherent product launch inefficiencies. Also operational challenges from the installation of new machinery associated with the sizeable capex project at our Newmarket large mould facility also had an adverse impact on productivity. This may continue for an additional quarter but thereafter sales should resume their normal trajectory as the order backlog is very strong and the large mould business continues to be awarded new business.  Sales at our Extrusion and Castool groups, however, were higher in the quarter and year-to-date.

Consolidated net income for the second quarter was $9 million or basic earnings of $0.21 per share compared to $10.9 million or $0.26 per share of basic earnings in the same quarter last year – a decrease of 17%. Consolidated net income year-to-date was up slightly at $20.8 million or basic earnings of $0.49 per share compared to $20.5 million or $0.49 per share in the prior year. Earnings in the quarter were adversely impacted by several factors. First, lower sales volumes and reduced profitability within the Casting and Extrusion segment as described above impacted earnings. Second, about $1 million of foreign exchange translation loss compared to a similar sized gain in the prior year quarter eroded earnings by $0.03 per share when comparing year over year results. Last, approximately $1 million of transaction-related costs (year-to-date $1.3 million) associated with the acquisition of AFX Industries LLC reduced earnings by $0.03 per share in both the quarter and year-to-date periods. The AFX acquisition closed on April 4, 2016.

The Automotive Solutions segment reported pretax profit of $11.1 million in the second quarter – an increase of $2.4 million or 28% over the same quarter last year. Year-to-date the segment reported pretax profit of $20.2 million – an increase of $3.7 million or 22% over the prior year period. The increase in the quarter and year-to-date periods were driven by both higher sales and margin expansion resulting from improved production efficiencies and better overhead absorption. All businesses in this group contributed to the segment's higher pretax profit with the exception of the ALC group which closed its South African operations in the second quarter. This led to slightly weaker ALC performance compared to last year. Combined losses at ALC's South African and Lesotho operations amounted to $1.6 million in the quarter and $2.9 million year-to-date, representing $0.04 per share and $0.07 per share respectively. The closure of the South African operations is expected to substantially improve ALC's operating results going forward.

The Casting and Extrusion segment reported lower pretax profit of $5.1 million in the second quarter – a decrease of $3.9 million or 43% from the same quarter last year. Year-to-date the segment reported pretax profit of $15.1 million or $1.4 million below the prior year period. Most of this reduction occurred in the large mould business which had significantly lower absorption rates and was negatively impacted by unfavorable mix variance and new product launch inefficiencies in the second quarter. Lower quarterly earnings were also experienced within the Extrusion die group but were offset by a similar increase at the Castool group when comparing year over year results.  Helped by strong top line growth, combined losses at our Brazilian and Thailand operations narrowed to $0.01 per share in the quarter from $0.02 per share in the prior year period while year-to-date losses for these two operations remained constant at $0.03 per share. Our Colombian extrusion operations also improved in the quarter and year-to-date with significant sales growth driving strong levels of profitability compared to a modest loss position last year. Earnings at our Texas extrusion operation were adversely impacted by operational adjustments following the move into a new facility at the start of the second quarter.

The Corporate segment expense increased to $3.3 million in the second quarter from $1.7 million in the prior year quarter. Approximately $1 million of this increase was due to transaction costs associated with the acquisition of AFX with much of the remaining amount attributable to adverse foreign exchange translation movements partially offset by lower stock option expense. Year-to-date Corporate segment expenses totaled $5.1 million compared to $3.5 million last year with essentially all of the difference occurring in the second quarter. Once again, the combination of AFX transaction costs and the foreign exchange translation swings led to reduced earnings per share by $0.05 in the quarter and $0.04 year-to-date in comparison to the prior year periods.

During the quarter, the Company's quality and delivery performance was recognized by numerous customers. Polytech received, for the third consecutive year, the General Motors Supplier Excellence Award. Neocon has been notified that Subaru will award it a supplier excellence award and Polydesign has achieved EcoVadis Gold Status for program sustainability with Faurecia.

Despite heavy capital spending and the post-quarter acquisition of AFX, the Company's pro-forma balance sheet remains strong. On this basis its net debt position totaled approximately $60.0 million. Cashflow remained strong with net cash provided by operating activities amounting to $12 million in the second quarter and $29.2 million year-to-date compared to $6.9 million and $5.0 million of cash in the same periods last year. Capital spending year-to-date totals about two-thirds of our $23.9 million in planned capital expenditures for fiscal 2016. The balance of our remaining capital spending will be partially offset by the recently announced non-repayable contribution of up to $4.6 million from the Canadian Federal government, which represents up to 50% of the costs for the Newmarket large mould facility capital project. Exco's cashflow is also expected to benefit from the conclusion of a commercial arbitration which the Company initiated in 2015. As a result of this development, Exco expects to receive approximately $3.5 million in the third fiscal quarter of 2016.

The outlook for Exco over the rest of the year continues to be fundamentally strong with foreign exchange, large mould product mix and the implementation of several operational initiatives at several of our business groups contributing to some variability in both top and bottom line. The inclusion of the AFX business in the third quarter and the discontinuance of ALC's South African operations are also expected to add significantly to earnings going forward.

(For further information and prior year comparison please refer to the Company's Second Quarter Condensed Financial Statements in the Investor Relations section posted at www.excocorp.com.  Alternatively, please refer to www.sedar.com)

Exco Technologies Limited is a global supplier of innovative technologies servicing the die-cast, extrusion and automotive industries. Through our 18 strategic locations in 10 countries, we employ 6,697 people and service a diverse and broad customer base.

A conference call to discuss these results will be held on Thursday, April 28, 2016 at 10:00 a.m. (Toronto time) which can be accessed by dialling (647) 427-7450 for local (Toronto) calls or toll free at (888) 231-8191.

To access the live audio webcast, please log on to www.excocorp.com, or http://event.on24.com/r.htm?e=1168546&s=1&k=AB3461F364F6E8E33C9E0EBE084518ED a few minutes before the event. The conference call can be accessed by dialling (647) 427-7450 for local (Toronto) calls or toll free at (888) 231-8191. 

Information in this document relating to projected growth and financial performance of the Company's business units, contribution of our start-up business units, contribution of awarded programs yet to be launched, margin performance, financial performance of acquisitions and operating efficiencies are forward-looking statements.

Readers are cautioned not to place undue reliance on forward-looking statements found mainly in this news release. These forward-looking statements are based on our plans, intentions or expectations which are based on, among other things, assumptions about the number of automobiles produced in North America and Europe, the number of extrusion dies required in North America and South America, the rate of economic growth in North America, Europe and emerging market countries, investment by OEMs in drivetrain architecture and other initiatives intended to reduce fuel consumption and/or the weight of automobiles, weakening raw material prices, continuing economic recovery, currency fluctuations which may in fact not occur and the rate at which our new operations in Brazil, Thailand and South Africa/Lesotho achieve profitability. These forward-looking statements include known and unknown risks, uncertainties, assumptions and other factors which may cause actual results or achievements to be materially different from those expressed or implied. For a more extensive discussion of Exco's risks and uncertainties see the 'Risks and Uncertainties' section in this Annual Report, our Annual Information Form ("AIF") and other reports and securities filings made by the Company. This information is available at www.sedar.com.

While Exco believes that the expectations expressed by such forward-looking statements are reasonable, we cannot assure that they will be correct. In evaluating forward-looking information and statements, readers should carefully consider the various factors which could cause actual results or events to differ materially from those indicated in the forward-looking information and statements. Readers are cautioned that the foregoing list of important factors is not exhaustive. Furthermore, the Company will update its disclosure upon publication of each fiscal quarter's financial results and otherwise disclaims any obligations to update publicly or otherwise revise any such factors or any of the forward-looking information or statements contained herein to reflect subsequent information, events or developments, changes in risk factors or otherwise. 

SOURCE Exco Technologies Limited

For further information: Paul Riganelli, Senior Vice President and Chief Operating Officer, Telephone: (905) 477-3065 Ext. 7228, Website: http://www.excocorp.com

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