Héroux-Devtek reports solid third quarter results



    
    - Sales for the third quarter increased 12.2% to $85.6 million
    - Operating income increased by 19.4% to $7.8 million or 9.2% of sales
    - Net income of $5.2 million or $0.16 per share fully diluted
    

    LONGUEUIL, QC, Feb. 5 /CNW Telbec/ - Héroux-Devtek Inc. (TSX: HRX), a
leading Canadian manufacturer of aerospace and industrial products, today
reported its results for the third quarter of fiscal 2009 ended December 31,
2008. Sales for the period reached $85.6 million, an increase of 12.2% over
sales of $76.3 million in the same quarter a year ago. Operating income for
the third quarter increased 19.4% over last year and now stands at $7.8
million, or 9.2% of sales, compared with $6.6 million, or 8.6% of sales, last
year. Given an effective tax rate of 23.2% in the third quarter of the current
fiscal year, versus a tax rate of only 0.4% a year ago due to the utilization
of tax losses carried forward, net income was $5.2 million, or $0.16 per
share, fully diluted, compared with $5.3 million, or $0.17 per share, fully
diluted, a year ago. Cash flows from operations amounted to $11.7 million, up
35.1% from $8.7 million a year earlier.
    For the first nine months of the current fiscal year, sales increased by
9.2% to reach $245.5 million, versus $224.8 million last year. Operating
income which increased by 34.7% compared to last year to now stands at $24.4
million, or 10.0% of sales, compares favourably with $18.1 million, or 8.1% of
sales, a year earlier. Net income amounted to $14.9 million, or $0.47 per
share, fully diluted, versus $12.5 million, or $0.39 per share, fully diluted,
a year ago. Net income for the nine months ended December 31, 2007, benefitted
from $1.6 million in tax loss utilization. Cash flows from operations were
$34.0 million, an increase of 31.3% over $25.9 million a year ago.
    The weaker Canadian dollar increased third-quarter sales by $7.4 million,
or 9.7%, compared with last year. However, in spite of this favourable
variance, the currency fluctuation had a 0.5% negative impact on gross profit
expressed as a percentage of sales considering the Company's hedging policy.
Effectively, the impact of currency movements 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. Year-to-date, currency fluctuations reduced
sales by $2.7 million, or 1.2%, in comparison with last year and reduced the
gross profit margin by 1.7%.

    
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Financial highlights
    (in thousands of dollars, except per share data)
    -------------------------------------------------------------------------
                                     Quarters ended        Nine months ended
                                      December 31,            December 31,
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Sales                         85,578      76,260     245,489     224,794
    Operating income               7,834       6,561      24,433      18,141
    Net income                     5,178       5,287      14,932      12,545
      Per share - basic ($)         0.16        0.17        0.47        0.40
      Per share - diluted ($)       0.16        0.17        0.47        0.39
    Cash flows from operations    11,709       8,664      33,986      25,882
    Weighted-average shares
     outst. (basic, in '000s)     31,640      31,629      31,648      31,601
    -------------------------------------------------------------------------
    

    "Results continue to reflect our solid order book and favourable market
positioning," said Héroux-Devtek President and CEO, Gilles Labbé. "While our
Landing Gear Division was somewhat affected by a labour conflict at a major
customer, both the Aerostructure and Gas Turbine Components divisions posted
good results. The latter also continued to strongly contribute to overall
profitability improvements. While pressures from a strong Canadian dollar have
abated as compared to last year, we aim to further leverage our productivity
in all operating aspects supported by investments in state-of-the-art
equipment made in recent years, and continued training and lean manufacturing
initiatives throughout the organization."
    As at December 31, 2008, Héroux-Devtek's balance sheet remained strong
with cash and cash equivalents of $31.7 million and long-term debt, including
the current portion, of $81.4 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 shareholders' equity.

    RECENT EVENTS

    On January 15, the Landing Gear Division announced it had signed a
contract with Fokker Services to supply complete aftermarket kits including
major components, such as pistons and cylinders, for the Fokker 100 aircraft.
Deliveries are expected to begin in the spring of 2010 and should be completed
by the end of calendar year 2013. Based on current projections, the total
value of the contract is estimated to be between $15 and $24 million.

    SECTOR RESULTS

    Aerospace sales for the third quarter amounted to $75.0 million,
representing an increase of 8.6% over sales of $69.1 million for the same
quarter last year. Sales of the Landing Gear Division declined 1.5% to $45.0
million, mainly as a result of the labour strike at Boeing and reduced
throughput on certain military sales which offset greater sales for regional
jet, business jet and commercial helicopter parts as well as military
helicopter repair and overhaul sales. Aerostructure sales grew 29.4% to $29.8
million driven by increased military sales to civil customers, business jet
sales and favourable currency movements during the quarter.
    The Aerospace segment operating income for the third quarter was stable
at $6.3 million. As a percentage of sales, it reached 8.4% in the current
fiscal year versus 9.1% a year ago. Despite higher sales, the reduction as a
percentage of sales stems from the currency translation loss on monetary items
mainly at the Landing Gear Division.
    Year-to-date sales for the Aerospace segment increased 6.8% to $217.2
million, while operating income amounted to $20.0 million or 9.2% of sales,
compared with $18.1 million, or 8.9% of sales, for the first nine months of
last year.
    Industrial sales for the third quarter totalled $10.5 million, up 47.0%
from $7.2 million last year. Revenue growth was mainly driven by increased
sales to the wind energy and heavy industry markets. Operating income amounted
to $1.6 million, or 14.8% of sales, versus $0.3 million last year. This
improvement mirrors the increase in value-added sales to the industrial gas
turbine and wind energy markets as well as sustained operational improvements.
    Industrial sales for the first nine months of the current fiscal year
increased 31.7% to $28.3 million in comparison with the first nine months a
year ago. Operating income reached $4.5 million, or 15.8% of sales, compared
with $0.1 million for the first nine months of last year.

    OUTLOOK

    Mounting economic uncertainty has reduced the volume of order intake for
large commercial aircraft manufacturers in recent months. While backlogs are
sound, existing orders can be deferred or cancelled. The military aerospace
market remains solid with major programs progressing as expected, although the
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, but the industrial gas turbine market may be impacted over time
by the financial crisis given the significant capital requirements of these
projects.
    "Héroux-Devtek is privileged to have long-standing and strong
relationships with its customers, most of which consist of large-scale and
financially-sound global players in their respective fields. Combined with a
favourable positioning in all our key markets and a solid balance sheet, these
superior attributes should enable the Company to maintain its current industry
leader status. In spite of the uncertain environment, our backlog remains
solid and we continue to anticipate an internal sales growth of close to 10%
for the current fiscal year ending March 31, 2009" concluded Mr. Labbé.

    CONFERENCE CALL

    Héroux-Devtek Inc. will hold a conference call to discuss these results
on Thursday, February 5, 2009 at 10 AM (ET). Interested parties can join the
call by dialling 416-644-3414 (Toronto or overseas) or 1-800-732-9303
(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
21294145# on your phone. This tape recording will be available on Thursday,
February 5, 2009, as of 12:00 PM until 11:59 PM on Thursday, February 12,
2009.

    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 statement

    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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