RICHMOND HILL, ON, April 27 /CNW/ - JITE Technologies Inc. ("Jite") (TSX
Venture Exchange: JTI) today reports its fourth quarter financial results for
the three-month period ended December 31, 2006 and annual financial results
for the twelve-month period ended December 31, 2006. All dollar figures are
reported in Canadian currency. The detailed financial statements and MD&A can
be found on www.sedar.com.
Some highlights of the annual and fourth quarter results:
- Sales for the 12 month period ended December 31, 2006 increased by
$3.75 million or (48.2%), compared with the same period last year.
- Sales for the quarter ended December 31, 2006 increased by $220,000
(or 8.4%) compared with the same period last year.
- Gross profit as a percentage of sales for the quarter ended December
31, 2006 decreased by 1.5% to 19.1% compared with the same period
last year. For the 12 month period ended December 31, 2006, gross
profit decreased by $414,000 (or 13.2%), as compared with the same
period last year.
- Selling, general and administrative ("SG&A") expenses for 2006 were
$2.75 million, $0.88 million higher compared to $1.88 million in
2005. SG&A expenses for the fourth quarters of 2006 and 2005 were
$980 thousand and $722, respectively.
- Net income for the 12 month period ended December 31, 2006 decreased
by $1.0 million (or 90.4%), compared with the same period last year.
The decrease in net income as compared to the prior year can be
attributed to the following:
- A significant increase in the cost of raw material and higher
- Additional professional expenses associated with public company
- Additional costs associated with setting up and relocation of the new
production facility in China
- Additional head office expenditures due to the reverse takeover
- $260 thousand in non cash stock-based compensation expenses
- $291 thousand write off in slow moving or obsolete inventory
- $91 thousand in provision for doubtful debts expenses
- Foreign exchange losses due to higher average exchange rate between
the Canadian Dollar, US Dollar, and Chinese RMB
Approximately half of the company's sales were in US dollar and the
remaining half in RMB. The strengthening of the Canadian dollar ("CDN$")
relative to the US dollar ("US$") during 2005 and 2006, when compared to the
prior year, had a negative effect on the Company's revenue. This negative
foreign exchange trend reduced the Company's sales and gross margin, when
compared to the sales and gross margin that JITE would have achieved had the
2005 exchange rate prevailed in 2006. In addition, all manufacturing
activities were carried out in China and were paid in RMB. The strengthening
of RMB in 2006 against Canadian dollar has a negative impact on the cost of
goods sold. Without the positive effects of new customer development and new
business development from existing customers muting its effect, this adverse
foreign exchange trend would have more severely adversely impacted JITE's
Management anticipates the strengthening of the CDN$ relative to the US$
and the appreciation of RMB against CDN$ will continue. As a result, in 2007,
the Company has identified three main opportunities realistically available to
it to mitigate the adverse effects of the current foreign exchange trend.
First, denominate as many of the Company's expenses as possible in US$, to
drive the expenses lower when converted to CDN$. Second, eliminate or reduce
expenses, regardless of the currency they were originally incurred in. Third,
continue to grow revenue with positive contribution margin, to take advantage
of available capacity.
In the past, management's primary emphasis in its approach to managing
the effect of the $US trend on JITE has been on generating revenue growth.
However, focusing on this approach alone turned out to be inadequate.
According to Dr. Gang Chai, Chairman of the Board, "2006 was a tough year for
the manufacturing industry. Prices for raw materials such as plastic, copper,
and crude oil had increased significantly throughout the year. For example,
copper, being one of the main raw materials in the production process,
increased from $1.50 to over $3.50 per lb in 2006. Likewise, crude oil price
had increased from an average of $57 per barrel to over $75 in August 2006
before it retrieved back to around $60 per barrel at year end. The higher
material costs had a direct impact on the manufacturing costs and consequently
lowered the profit margin."
To counter the downward trend of decreasing gross margin and net income,
management has taken the following additional steps. First, it has increased
the selling price in the last quarter of 2006 across all product lines with an
average price increase of 10%. At the same time, new cost reduction
initiatives have been identified and to be implemented in the second quarter
of 2007, to create a much improved cost structure for the business. Lastly,
management is actively pursuing higher profit margin projects such as private
brand manufacturing for other connector manufacturers who wish to outsource
production to external, lower cost manufacturers.
Management believes these steps will improve the overall financial
performance of the Company.
The statements made in this press release that are not historical facts
contain forward-looking information that involves risk and uncertainties. All
statements, other than statements of historical facts, which address JITE's
expectations, should be considered forward-looking statements. Such statements
are based on management's exercise of business judgment as well as assumptions
made by and information currently available to management. When used in this
document, the words "may", "will", "anticipate", "believe", "estimate",
"expect", "intend" and words of similar import, are intended to identify any
Forward-looking statements. You should not place undue reliance on these
forward-looking statements. These statements reflect our current view of
future events and are subject to certain risks and uncertainties as contained
in the Company's filings with Canadian securities regulatory authorities.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, our actual results could differ
materially from those anticipated in these forward-looking statements. We
undertake no obligation, and do not intend, to update, revise or otherwise
publicly release any revisions to these forward-looking statements to reflect
events or circumstances after the date hereof, or to reflect the occurrence of
any unanticipated events. Although we believe that our expectations are based
on reasonable assumptions, we can give no assurance that our expectations will
JITE designs and manufactures electronic and electrical connection
devices for security, industrial control, automation, telecommunication, and
power supply industries. JITE is headquartered in Toronto, Canada and carries
out research and manufacturing operations in Shenzhen China at its ISO 9001
For more information, visit JITE at www.jite.com.
The TSX Venture Exchange Inc. has not reviewed and does not accept
responsibility for the adequacy or accuracy of this release.
For further information:
For further information: JITE Investor Contact: Dr. Gang Chai, Chairman
of the Board, Tel: (416) 366-7420; Henry Tse, Chief Financial Officer, Tel: