All amounts in Canadian dollars unless otherwise stated.
QUEBEC CITY, May 11, 2010 /CNW Telbec/ - H2O Innovation Inc. (TSX VENTURE:HEO)(ALTERNEXT:MNEMO:ALHEO)
Sales of $6.3 million, down from $8.8 million for the same period in
Gross margin at 25.4%, compared to 26.4% for the same period in fiscal
Operating loss of ($1,269,539), compared to operating earnings of
$268,446 for the same period in fiscal 2009.
EBITDA at ($980,271), compared to $1,180,650 for the same period in
fiscal 2009 (including the effects of a mostly unrealized foreign
Net loss of ($1,558,567), compared to net income of $684,423 for the
same period in fiscal 2009 (including the effects of a mostly
unrealized foreign exchange loss).
Operating activities used ($1,146,876) in cash, compared to $1,173,520
in cash generated for the same period in fiscal 2009.
Company implements cost reduction and spending control program expected
to trim approximately $1.25 M in total annual expenses.
H2O Innovation Inc. ("H2O Innovation" or the "Company") announces today its results for the
third quarter of fiscal year 2010. During the quarter, H2O Innovation's results continued to feel the enduring impact of the
recession as the Company's sales, gross margin, EBITDA and net loss are
down compared to the same period in fiscal 2009. The low level of
capital investments made by the Company's customers - both in the
municipal and industrial sectors - translated into unusually low
revenues from system sales, which a nominal increase in revenues from
sales of services and consumables was not enough to compensate.
Acting quickly upon this prolonged slowdown in systems sales, H2O Innovation put in place several growth-fostering initiatives seeking
to increase its sales of water treatment systems, while implementing a
cost reduction and spending control program. Sales growth initiatives
notably include entering into a sales representation agreement with 3M
Purification and creating the joint venture H2O Innovation India Ltd. to serve the fast growing Indian industrial,
commercial, and institutional markets. Management expects sales growth
from these initiatives to start being noted in the following quarters.
Conceived and having started to be implemented after the end of the
quarter, the Company's cost reduction and spending control program is
expected to trim approximately $1.25 M in total annual expenses. The
program has been developed with the objective of preserving the
Company's sales and engineering resources, essential to fuel the
Company's sales growth.
CONSOLIDATED RESULTS (Unaudited)
ended March 31
ended March 31
Operating earnings (loss)
EBITDA excluding unrealized foreign exchange gain (loss)
Net earnings (loss) for the period and comprehensive results
Basic and diluted net earnings (loss) per share
Cash generated (used) from (by) operating activities
The Company's gross margin for the quarter was 25.4%, slightly down
compared to 26.4% for the corresponding quarter of the previous fiscal
year but significantly higher than during the previous quarter of the
current fiscal year (Q2 2010), when it was recorded at 22.1%. The
nominal decrease of $2,242,990 is explained by various factors, but
most significantly by the nominal decrease in revenues from systems
sales, in turn caused by an insufficient level of contracts for water
treatment systems secured during the first months of the recession. The
nominal reduction in system sales negated the increase in sales of
services and consumables, which, contrary to system sales, performed
well during the quarter and have shown a constant growth quarter after
The sales backlog stood at $14.5 M as at March 31, 2010. The sales
backlog is entirely composed of systems and equipment sales and does
not include sales of services or consumables, which represented 43% of
the Company's total sales for the quarter, an unusually high proportion
of total sales due to lower system sales recorded during the quarter.
In the two previous quarters of fiscal 2010, sales of services and
consumables represented 27% and 33% of total sales.
COST REDUCTION AND SPENDING CONTROL PROGRAM
Acting on the decline in systems sales and in order to maintain high
margins and return to positive EBITDA, the Company has prepared a cost
reduction and spending control program with the objective to trim
approximately $1.25 M in total annual expenses. This program started to
be implemented shortly following the end of the third quarter.
Management expects the effects of the program to be divided in a 40/60
proportion between productivity gains and reductions in selling,
general and administrative fees. The effects of the program are
expected to start showing in the fourth quarter of fiscal 2010 and to
reach their full effect in fiscal 2011. The program includes hiring
freeze, workweek reduction for manufacturing staff, selected layoffs,
along with a reduction in trade show and travel expenses. All
manufacturing processes are also being analyzed to identify additional
operational efficiencies, especially in the lower value-added tasks of
the Company's manufacturing processes. Selling, general and
administrative functions will also thoroughly be reviewed to improve
the Company's business processes.
"Although we cannot be pleased by the low total sales figure of our
third quarter results, we are encouraged by the increase in our gross
margin compared to the previous quarter. Our growing sales pipeline,
the constructive growth initiatives we announced during the quarter and
now the cost reduction program we are implementing will all be key
factors moving the Company towards positive results, our top priority",
stated Frédéric Dugré, President and CEO of H2O Innovation Inc.
Over $5.8 M in new contracts for water treatment systems during the
During the quarter, H2O Innovation successfully secured over $5.8 M in new contracts for water
treatment systems and equipments, 38% more than during the previous
quarter of fiscal 2010 and 115% more than during the first quarter of
fiscal 2010. These contracts will translate into revenues during the
next quarters. As soon as the Company's industrial system sales
significantly slowed down at the beginning of the recession, Management
reallocated part of its industrial sales and engineering teams to serve
the municipal sector, enabling H2O Innovation to cover U.S. states and regions previously not covered for
municipal equipment sales. This reallocation has been a key factor for
the Company to successfully secure contracts providing two integrated
ultrafiltration and reverse osmosis systems for municipal water
treatment plants in North Dakota, H2O Innovation's first sizeable municipal sales in the U.S. Midwest.
Management sees their signing - and the positive trend in new bookings
recorded quarter-over-quarter - as a sign of momentum picking up in the
"We remain highly focused on building momentum with our system sales in
North America and in India, thanks to the initiatives put in place
during the quarter and to the hard work and dedication of our team. The
weeks and months ahead will require that everyone within our Company
step up their efforts as we implement our cost reduction and spending
control program. Our common objective is to quickly put H2O Innovation back on track for profitable growth", concluded Frédéric
Sales representation agreement with 3M Purification extended to cover
On January 20, 2010, H2O Innovation signed a sales representation agreement with 3M
Purification which sees it represent the Company's complete line of
customized water treatment solutions (systems and consumable products)
in the U.S. oil & gas and automotive assembly markets. Two months
later, on March 25, 2010, the initial agreement with 3M Purification
was extended to cover the same markets in Canada. 3M Purification and H2O Innovation resources from both sides of the border have been working
together from day one developing a sales pipeline from 3M
Purification's client base. This agreement brings the Company a very
reputable sales force, increased visibility, and added credibility in
two important segments of the North American industrial water treatment
Creation of H2O Innovation India to serve Indian industrial, commercial, and
On February 1, 2010, H2O Innovation created H2O Innovation India, a joint venture to provide water treatment systems
and maintenance services to the fast growing Indian industrial,
commercial, and institutional markets. Its twelve-employee sales and
engineering team is actively pursuing sales opportunities in the local
Indian market with the support and knowledge of H2O Innovation's engineers. H2O Innovation India's sales objectives are to generate between
CAN$5 million and CAN$8 million within its first three years of
In addition, H2O Innovation India will serve to increase the Company's competitiveness
on international projects by having part or all of them manufactured in
India. The Company also seeks to leverage its global supply chain by
using H2O Innovation India to source at favorable costs key system components
and parts for North American and international projects.
H2O Innovation has continued to put in place growth-fostering initiatives
subsequently to the end of the quarter. The Company's Professional
Water Technologies business unit has developed three new membrane
cleaners targeting the ultrafiltration and microfiltration membrane
markets, extending its product offering beyond solutions for reverse
The third quarter financial report is available on the Company's Website
(www.h2oinnovation.com) and on NYSE Euronext Alternext's site (www.alternext.fr). Additional information on the Company is also available on SEDAR (www.sedar.com).
Conference call and webcast
H2O Innovation will hold a conference call today Tuesday May 11, 2010 at
10:30 a.m. (Eastern time) to review the results for the third quarter.
The call will begin with a presentation by Frédéric Dugré, President
and Chief Executive Officer of H2O Innovation, and Annie Lemieux, Chief Financial Officer of H2O Innovation. A question-and-answer period will follow. A slide
presentation intended for simultaneous viewing during the call will be
available this morning on the Financial Reports and Webcasts page of
the Investors section of the Company's website.
Shareholders, analysts and institutional investors are invited to
participate. The numbers to dial for access are 514-392-9193 (Montreal
area) or the North American toll-free number 1-866-226-1793.
International participants are invited to dial +1 514-392-9193.
Media representatives and other interested parties may participate in
listen only mode or may listen to the live webcast of the conference
call (audio and slides) accessible through H2O Innovation's website at www.h2oinnovation.com. The webcast will remain available for replay on the Company's website
for 90 days in the Investors section.
Certain statements set forth in this press release regarding the
operations and the activities of H2O Innovation as well as other communications by the Company to the
public that describe more generally management objectives, projections,
estimates, expectations or forecasts may constitute forward-looking
statements within the meaning of securities legislation.
Forward-looking statements concern analysis and other information based
on forecast future results and the estimate of amounts that cannot yet
be yet determined. Forward-looking statements include the use of the
words "expect", "believe", "estimate" and other similar terms as well
as those usually used in the future and the conditional, notably
regarding certain assumptions as to the success of a venture. Those
forward-looking statements involve a number of risks and uncertainties
which may result in actual and future results of the Company to be
materially different than those indicated. Information about the risk
factors to which the Company is exposed is provided in the Annual
Information Form dated September 28, 2009 available on SEDAR (www.sedar.com). Unless required to do so pursuant to applicable securities
legislation, H2O Innovation assumes no obligation to update or revise forward-looking
statements contained in this press release or in other communications
as a result of new information, future events and other changes.
About H2O Innovation
With 10 years of experience developing water treatment solutions, H2O Innovation is establishing itself as a key player in sustainable
development and clean technologies in North America and abroad. H2O Innovation designs, develops, produces, and integrates
state-of-the-art custom-built water treatment systems for the
production of drinking water, the reclamation of water, the treatment
of wastewater and industrial process water in the municipal,
commercial, industrial, oil & gas, mining, and energy markets.
Additionally, the Company offers complete operating and maintenance
solutions for membrane filtration and reverse osmosis systems. H2O Innovation has approximately 100 employees and eight offices including
three manufacturing plants in Canada and the United States and is a
founding partner of H2O Innovation India, a joint venture with Chembond Chemicals of Mumbai,
India. Shares of H2O Innovation are listed on the TSX Venture Exchange (HEO) as well as on
the NYSE Euronext Alternext Exchange (MNEMO:ALHEO). For more
information about H2O Innovation, visit the Company's website at www.h2oinnovation.com.
Neither TSX Venture Exchange nor its Regulation Services Provider (as
that term is defined in the policies of the TSX Venture Exchange) nor
the Alternext Exchange accepts responsibility for the adequacy or
accuracy of this release.
SOURCE H2O Innovation Inc.
For further information: For further information:
H2O Innovation Inc.
418-688-0170 ext. 329