Héroux-Devtek reports solid second quarter results



    
    - Sales increase 10.9% to $77.3 million
    - Operating income of $6.8 million, up 30.7% from $5.2 million last year
    - Net income of $4.1 million, or $0.13 per share, compared with
      $3.1 million, or $0.10 per share
    

    LONGUEUIL, QC, Oct. 31 /CNW Telbec/ - Héroux-Devtek Inc. (TSX: HRX), a
leading Canadian manufacturer of aerospace and industrial products, today
reported its results for the second quarter of fiscal 2009 ended September 30,
2008. Sales for the period reached $77.3 million, an increase of 10.9% over
sales of $69.8 million in the same quarter a year earlier. Operating income
stood at $6.8 million, compared with $5.2 million last year, while net income
reached $4.1 million, or $0.13 per share, fully diluted, compared with
$3.1 million, or $0.10 per share, fully diluted, for the same quarter last
year. Cash flows from operations amounted to $10.6 million, up 27.4% from
$8.3 million a year ago.
    For the first six months of the current fiscal year, sales increased by
7.7% to reach $159.9 million, versus $148.5 million last year. Operating
income totalled $16.6 million compared with $11.6 million a year earlier. Net
income amounted to $9.8 million, or $0.31 per share, fully diluted, versus
$7.3 million, or $0.23 per share, fully diluted, a year ago. Cash flows from
operations stood at $22.3 million, an increase of 29.3% over $17.2 million a
year ago.
    The stronger Canadian dollar reduced second-quarter sales by
$2.8 million, or 4.0%, compared with last year and lowered the gross profit
margin by 2.8%. After the first six months, sales were reduced by
$10.2 million due to the stronger Canadian dollar, or 6.8%, compared with last
year and gross profit margin by 3.0%. The impact of the stronger Canadian
dollar against the US currency on the Company's gross profit margin, expressed
as a percentage of sales, is mitigated by the use of forward foreign exchange
sales contracts and the natural hedging from the purchase of materials made in
US dollars.

    
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Financial highlights
    (in thousands of dollars, except per share data)
    -------------------------------------------------------------------------
                                  Quarters ended          Six months ended
                                   September 30,             September 30,
                                 2008         2007         2008         2007
    -------------------------------------------------------------------------
    Sales                      77,340       69,758      159,911      148,534
    Operating income            6,796        5,200       16,599       11,580
    Net income                  4,056        3,107        9,754        7,258
      Per share - basic and
       diluted ($)               0.13         0.10         0.31         0.23
    Cash flows from
     operations                10,558        8,285       22,277       17,223
    Weighted-average shares
     outstanding (basic)   31,657,841   31,622,268   31,651,611   31,587,133
    -------------------------------------------------------------------------

    "We are pleased with our second quarter performance which reflects solid
business activity in our key markets and profitability improvements," said
Héroux-Devtek President and CEO, Gilles Labbé. "Once again, all divisions
generated higher sales and gross profit. We are particularly satisfied with
robust sales and profitability increases at the Gas Turbine Components
Division. Strong military activity was the main driver in Aerospace
operations, which remained, however, somewhat affected by unfavourable
year-over-year currency fluctuations."
    As at September 30, 2008, Héroux-Devtek's balance sheet remained strong
with cash and cash equivalents of $30.1 million and long-term debt, including
the current portion, of $78.5 million. As a result, the net-debt-to-equity
ratio stood at 0.26:1, compared with 0.29:1 at March 31, 2008. The
net-debt-to-equity ratio is defined as the total long-term debt, including the
current portion, less cash and cash equivalents over the shareholders' equity.

    SECOND QUARTER HIGHLIGHTS

    - Brazilian aircraft manufacturer Embraer awarded the Landing Gear
      Division a long-term contract to design, develop, fabricate, assemble,
      test and deliver landing gear structure and actuation for the Legacy
      450 and Legacy 500 business aircraft programs. This life-cycle mandate
      also includes the provision of spare parts. The Legacy 500 is expected
      to enter service in the second half of 2012, and the Legacy 450 in the
      second half of 2013.

    - The Aerostructure Division has signed a letter of agreement with Bell
      Helicopter Textron accompanied by orders to manufacture primary
      structural components for the new Bell Helicopter 429, such as cabin,
      cockpit and aft fuselage components and sub-assemblies. The letter of
      agreement covers a period up to 2015 and the value of potential orders
      over that period is currently estimated in stated Canadian currency at
      about $57 million.

    - The Landing Gear Division was awarded additional contracts for the
      repair and production of landing gear components mainly for the B-2,
      C-5, F-16, P-3 and T-37 aircraft, essentially from the U.S. Air Force
      and the U.S. Navy. Production will be spread out over the next
      four years. The combined value of the contracts is in excess of
      $15.8 million.
    

    SECTOR RESULTS

    Aerospace sales for the second quarter totaled $68.1 million,
representing an increase of 9.4% over sales of $62.3 million for the same
quarter last year. Sales of the Landing Gear Division grew by 9.2% to
$44.8 million, mainly reflecting increased military repair and overhaul work
as well as greater business jet and helicopter program sales. Aerostructure
sales reached $22.9 million, up 9.8% over last year owing to catch-up on
deliveries for the F-15 and F-22 programs as well as increased activity in the
business jet sector.
    Operating income reached $5.3 million, or 7.8% of sales, compared with
$5.4 million, or 8.6% of sales, a year earlier. The decrease as a percentage
of sales is essentially attributable to the impact of currency fluctuations on
the Landing Gear Division and to higher selling and administrative expenses
that included a $0.5-million currency translation loss on net monetary items.
    For the first six months of fiscal 2009, sales for the Aerospace segment
increased 5.9% to $142.1 million. Operating income reached $13.7 million, or
9.6% of sales, compared with $11.8 million, or 8.8% of sales reported for the
same period last year.
    Industrial sales for the second quarter increased 23.3%, to reach
$9.2 million. Sales of Industrial Gas Turbine and Wind Energy components all
grew in excess of 20%. Reflecting a significant increase in value-added
Industrial Gas Turbine component sales, operating income reached $1.5 million,
or 16.3% of sales, compared with an operating loss of $0.2 million last year.
    During the first six months of fiscal 2009, Industrial sales increased
24.1% to $17.8 million while operating income amounted to $2.9 million, or
16.3% of sales, compared with an operating loss of $0.2 million a year ago.

    OUTLOOK

    Order books remain strong for large commercial aircraft manufacturers,
but recent events have yielded uncertain market conditions. First, the current
financial and economic crisis may impact existing orders and may also reduce
new orders going forward. Second, the Company is closely monitoring the
situation at Boeing where labour conflicts have deferred certain deliveries
from the third quarter to next quarters. Third, it is worth mentioning that
the recent deterioration of the Canadian dollar versus the U.S. currency will
not have an immediate favourable impact on the sales in light of the Company's
hedging policy while it will contribute to the improvement of the Company's
competitiveness for new potential sales contracts. Meanwhile, the military
aerospace market remains solid. For example, all System Development and
Demonstration (SDD) Joint Strike Fighter (JSF) aircraft workload should be
delivered by the end of calendar 2008 and production has already begun on the
Low Rate Initial Production (LRIP) aircraft. However, a new U.S.
administration may reduce funding of future military budgets. In the power
generation industry, the wind energy market continues to experience robust
demand, while the currently solid industrial gas turbine market may be
impacted over the mid-term by the financial crisis given the large-scale
nature of underlying projects.
    "As our backlog remains solid, we continue to expect achieving close to
10% internal sales growth in fiscal 2009. We are committed to investments in
training and lean manufacturing initiatives, while continuing to focus on
achieving further productivity improvements to maintain our competitiveness.
Very strong customer relationships, favourable positioning in all our key
markets and a solid balance sheet are superior attributes that should enable
Héroux-Devtek to maintain its current industry leader status," concluded
Mr. Labbé.

    CONFERENCE CALL

    Héroux-Devtek Inc. will hold a conference call to discuss these results
on Friday, October 31, at 10:00 AM (ET). Interested parties can join the call
by dialling 416-644-3416 (Toronto or overseas) or 1-800-732-9307 (elsewhere in
North America). The conference call can also be accessed via live webcast at
www.herouxdevtek.com, www.newswire.ca or www.q1234.com.
    If you are unable to call in at this time, you may access a tape
recording of the meeting by calling 1-877-289-8525 and entering the passcode
21286338# on your phone. This tape recording will be available on Friday,
October 31, 2008, as of 12:00 PM until 11:59 PM on Friday, November 7, 2008.

    PROFILE

    Héroux-Devtek (TSX: HRX), a Canadian company, serves two main market
segments: Aerospace and Industrial Products, specializing in the design,
development, manufacture and repair of related systems and components.
Héroux-Devtek supplies both the commercial and military sectors of the
Aerospace segment with landing gear (including spare parts, repair and
overhaul services) and airframe structural components. The Company also
supplies the Industrial segment with large components for power generation
equipment and precision components for other industrial applications.
Approximately 65% of the Company's sales are outside Canada, mainly in the
United States. The Company's head office is located in Longueuil, Québec with
facilities in the Greater Montreal area (Longueuil, Dorval, Laval and
Rivière-des-Prairies); Kitchener and Toronto, Ontario; Arlington, Texas and
Cincinnati, Ohio.

    Forward-looking statements

    Except for historical information provided herein, this press release may
contain information and statements of a forward-looking nature concerning the
future performance of the Company. These statements are based on suppositions
and uncertainties as well as on management's best possible evaluation of
future events. Such factors may include, without excluding other
considerations, fluctuations in quarterly results, evolution in customer
demand for the Company's products and services, the impact of price pressures
exerted by competitors, and general market trends or economic changes. As a
result, readers are advised that actual results may differ from expected
results.

    Note to readers

    Complete unaudited interim consolidated financial statements and
Management's Discussion & Analysis of Financial Position and Operating Results
are available on Héroux-Devtek's website at www.herouxdevtek.com




For further information:

For further information: Héroux-Devtek Inc.: Gilles Labbé, President and
Chief Executive Officer, (450) 679-3330; Réal Bélanger, Executive
Vice-President and Chief Financial Officer, (450) 679-3330; MaisonBrison:
Martin Goulet, CFA, (514) 731-0000

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