Mecachrome International reports second quarter 2008 results



    - Gérard Casella to assume President and Chief Executive Officer function

    MONTREAL, Aug. 12 /CNW Telbec/ - Mecachrome International Inc. (TSX: MCH)
today reported its results for the second quarter ended June 30, 2008 and
announced that M. Gérard Casella will assume the function of Chairman,
President and Chief Executive Officer of Mecachrome International.

    
    Highlights for the second quarter ended June 30, 2008:

    - Revenues remained stable at (euro)77.9 million for the quarter and were
      up 5.8% for the six months period ended June 30, 2008 compared to
      corresponding periods in 2007
    - Adjusted EBITDA decreased to (euro)9.9 million
    - Backlog remained strong at (euro)1.0 billion
    - Continued progress on Profitability Improvement Plan, Special Committee
      of the Board formed and financial advisor retained to support its
      development and implementation


    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Financial Highlights
    (expressed in thousands of euros,
     except shares and per share data)
    -------------------------------------------------------------------------

                                  Three-month periods     Six-month periods
                                          ended                 ended
                                         June 30,              June 30,
                                ---------------------------------------------
                                       2008      2007       2008       2007
                                ---------------------------------------------
    Revenues                         77,878    77,749    157,996    149,371
    Adjusted EBITDA                   9,902    17,152     23,161     28,029
    Adjusted EBIT                     1,701     9,161      7,907     13,117
    Net income (loss)               (11,759)     (875)   (10,456)    (4,708)
    Adjusted net loss                (4,920)    1,443     (3,617)    (2,390)
    Net income (loss) per
     share - basic                    (0.49)    (0.09)     (0.44)     (0.52)
    Net income (loss)
     per share - diluted              (0.49)    (0.09)     (0.44)     (0.52)
    Cash flows from operations        5,677     7,976      8,123      8,490
    Basic weighted average
    number of shares outstanding
     (in thousands)                  23,775     9,391     23,775      9,065
    Diluted weighted average
    number of shares outstanding
     (in thousands)                  23,775     9,391     23,775      9,065
    -------------------------------------------------------------------------
    

    Update on Profitability Improvement Plan

    As previously announced, despite the long-term positive outlook for the
aerospace industry and Mecachrome's solid backlog, the Company is contending
with headwinds in its end markets. Delays affecting certain of our aerospace
programs such as the Airbus 380, Airbus A400M and the Boeing 787 continue to
impact us as well as the F-1 freeze in engine development and its technical
regulatory changes.
    In response to these challenges and as previously announced, Mecachrome
has established an action plan aimed at improving the Company's profitability
and cash generation (the "Profitability Improvement Plan"). This Profitability
Improvement Plan is well underway and is being implemented in two phases.
Phase 1 measures announced in May 2008 are expected to result in recurring
annual cost savings of approximately (euro)10 million on a run rate basis
starting the first quarter of 2009. Under Phase 2, the Company is conducting a
more thorough operational review of its business activities to reposition its
competitiveness in a challenging market environment. The operational review is
expected to be completed in the fall.

    Gérard Casella named President and Chief Executive Officer, Special
    Committee of the Board formed, RBC Capital Markets retained by the
    Company

    In a board meeting held on August 12, 2008, Mr. Gérard Casella, founder
of Mecachrome and Chairman of the Board, has been named President and Chief
Executive Officer of Mecachrome International. His first objective is to take
responsibility of the operational management of the Company and implement
immediately a restructuring plan that will increase the Company's
profitability and insure the long-term success of the Company.
    Mr. Gérard Casella will rely on the work done to date by the Special
Committee formed of independent board members which was formed a month ago and
RBC Capital Markets, Mecachrome International's financial advisor. The mandate
of the Special Committee is to monitor the Profitability Improvement Plan and
to review and evaluate the range of alternatives for the Company to reduce its
operating costs, its financing costs and improve its liquidity.
    "Given our current situation, we believe these are the right steps to
take at this time to enable the Company to grow profitably in the long term,"
stated Gérard Casella, Chairman, President and Chief Executive Officer of
Mecachrome International. "During this process, a top priority will be to
continue providing high quality products and services to our customers. Going
forward, we will continue to exert strict financial discipline by controlling
costs and tightly managing our cash", he added.

    Results of Operations

    Revenues

    Consolidated revenues for the quarter were (euro)77.9 million, a slight
increase of (euro)0.1 million over the second quarter of 2007. Despite slowing
volume in the second quarter of 2008, our year-over-year revenues increased by
(euro)8.6 million or 5.8%. Manufacturing revenues increased by
(euro)9.8 million for the year-to-date period, while engineering revenues
decreased by (euro)1.1 million. Both our European and North American
operations showed improvement in year-to-date revenues ((euro)5.7 million and
(euro)2.9 million increases, respectively).
    Revenues from our aerospace business increased by (euro)6.8 million
(20.3%) and (euro)14.3 million (22.2%) respectively for the three and six
month periods ended June 30, 2008. The improvement is attributable largely to
work in our European operations on Airbus programs such as the A330-340
widebody, as well as increased production volumes in respect of Rolls-Royce's
V2500 engine for the A320. Additional top-line growth was generated on
Embraer's ERJ 170-190 program as well as Snecma's CFM56-7 engine for the
Boeing 737 Next Generation models.
    In our North American operations, the increase in revenues for the first
six months of 2008 is due to the commencement of deliveries on the
A330-340 program.
    Compared to prior year, revenues from our automotive business decreased
by (euro)3.1 million (8.2%) in the second quarter and (euro)5.0 million (6.9%)
for the six months ended June 30, 2008. Our motor sports business continues to
be adversely impacted by the freeze in engine development, thereby
slowing-down our Formula 1-related revenue in the quarter. Revenues from our
commercial automobile line experienced modest reductions in volume in the
current year, due in part to the stoppage of the TU5JP4 engine program for
Française de Mécanique.
    Year-to-date revenues from our industrial/energy business are in line
with prior year ((euro)12.2 million for 2008 compared to (euro)12.9 million
for 2007), despite decreased volume in the second quarter of 2008. The
decreased demand was the result of changes at the client program level.

    Gross Margin

    Compared to the prior year, gross margin decreased by (euro)4.6 million
in the second quarter of 2008 and (euro)3.3 million for the year-to-date
period. As a percentage of revenue, our gross margin decreased from 27.3% in
the first six months of 2007 to 23.7% in the current year. Gross margin was
impacted by the greater composition of raw materials in our cost, as material
pass-through generates lower returns than our manufacturing processes, as well
as a greater portion of purchased parts converted into sales at lower margins
and a slowdown in major programs such as the B787 program, A380, A400m and
lower revenues from F1.

    Selling, general and administrative expenses

    On a year-to-date basis, selling, general and administrative expenses
increased by (euro)1.5 million to (euro)14.2 million in 2008. The increase
over prior year is due in large part to foreign exchange gains recognized in
2007, which account for (euro)1.2 million of the year-to-date change. For the
second quarter, foreign exchange gains account for (euro)2.2 million of the
(euro)2.6 million change in selling, general and administrative expenses.

    Adjusted EBITDA

    Adjusted EBITDA represents net loss before amortization, interest
expense, special items, income taxes and minority interest. For the second
quarter, adjusted EBITDA decreased from (euro)17.2 million in 2007 to
(euro) 9.9 million in the current year. For the first six months of 2008,
adjusted EBITDA decreased by (euro)4.9 million to (euro)23.2 million. Adjusted
EBITDA margins decreased from 18.8% in 2007 to 14.7% in the first six months
of 2008, due mainly to decreased gross margins in 2008 and foreign exchange
gains in 2007. Foreign exchange gains accounted for (euro)2.2 million of the
year-over-year change in adjusted EBITDA.

    Amortization

    For the first six months of 2008, amortization increased slightly from
(euro)14.9 million in 2007 to (euro)15.3 million in the current year. The
commencement of production lines in our European operations, primarily in the
automotive segment, contributed to the increased amortization in 2008. This
increase was largely offset by decreased amortization charges related to the
change in estimate for our buildings and manufacturing equipment.

    Adjusted EBIT

    Adjusted EBIT represents adjusted EBITDA less amortization. In 2008,
adjusted EBIT decreased by (euro)7.5 million for the second quarter and 
(euro)5.2 million in the first six months of 2008.

    Interest expense

    Interest expense decreased from (euro)14.0 million in the first six
months of 2007 to (euro)11.9 million in the current year, a reduction of
14.6%. The improvement is due to a reduced debt level in 2008, as well as the
impact of reduced amortization of deferred financing fees, following the
repayment of most of our Term B loan in the fourth quarter of 2007. Also, in
the first six months of 2007, the Company recognized an expense of
(euro)0.7 million related to the reduction in the fair value of the embedded
derivative on our senior notes. The improvement in year-over-year interest
expense was partially eroded in the second quarter of 2008 due to increased
levels of factoring, resulting in a net decrease of (euro)0.2 million for the
quarter.

    Special Items

    A charge for Special Items of (euro)6.8 million was recorded in the
second quarter of 2008. This charge is comprised mainly of the cancellation of
all outstanding grants under the stock option and restricted share unit plans
(a non-cash charge of (euro)4.7 million), as well as costs associated with our
Phase I restructuring ((euro)2.1 million). Additional costs associated with
the restructuring plan are expected prior to December 31, 2008.
    In light of the business and market circumstances, the Company will
evaluate certain of its key assets for potential impairment. We expect to
complete this process prior to year-end.
    In the second quarter of 2007, the Company incurred Special Items of
(euro)2.3 million relating to its U.S operations and administrative functions.

    Income taxes

    Our income tax recovery for the first six months of 2008 was
(euro)0.4 million compared to a future income tax expense of (euro)1.5 million
for the same period last year. For the second quarter of 2008, our income tax
expense was (euro)0.1 million compared to an expense of (euro)1.1 million for
the same period last year.

    Net loss

    Net loss for the second quarter of 2008 was (euro)11.8 million compared
to a net loss of (euro)0.9 million in the second quarter of 2007. The change
is due largely to reduced operating margins and costs associated with our
restructuring plan. Net loss for the first six months of 2008 was
(euro)10.5 million compared to a net loss of (euro)4.7 million for the same
period last year.

    SELECTED FINANCIAL INFORMATION

    A summary of Mecachrome's consolidated interim financial results as at,
and for the periods ended June 30, 2008 and 2007 is included below. The full
interim report and Management's Discussion and Analysis can be found on
www.mecachrome.com or on www.sedar.com.

    
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                       Selected Financial Information

    Unaudited
    (in thousands of euros)
    -------------------------------------------------------------------------

                     Three-month periods ended      Six-month periods ended
                              June 30,                      June 30,
                   -----------------------------  ---------------------------
                                         Varia-                        Varia-
                       2008      2007     tion       2008      2007     tion
                   -----------------------------  ---------------------------

    Revenues         77,878    77,749      129    157,996   149,371    8,625
    Cost of sales    61,635    56,869    4,766    120,594   108,629   11,965
                   -----------------------------  ---------------------------
    Gross margin     16,243    20,880   (4,637)    37,402    40,742   (3,340)
                   -----------------------------  ---------------------------
                       20.9%     26.9%               23.7%     27.3%

    Selling, general
     and
     administrative
     expenses         6,341     3,728    2,613     14,241    12,713    1,528
    Adjusted EBITDA   9,902    17,152   (7,250)    23,161    28,029   (4,868)
                       12.7%     22.1%               14.7%     18.8%

    Amortization      8,201     7,991      210     15,254    14,912      342
                   -----------------------------  ---------------------------
                   -----------------------------  ---------------------------
    Adjusted EBIT     1,701     9,161   (7,460)     7,907    13,117   (5,210)
                   -----------------------------  ---------------------------
    Interest expense  6,490     6,644     (154)    11,944    13,982   (2,038)
    Special items     6,839     2,318    4,521      6,839     2,318    4,521

    (Loss) income
     before income
     taxes and
     minority
     interest       (11,628)      199  (11,827)   (10,876)   (3,183)  (7,693)
                   -----------------------------  ---------------------------
    Income taxes
      Current                   1,088   (1,088)               1,088   (1,088)
      Future            131       (18)     149       (420)      431     (851)
                   -----------------------------  ---------------------------
                        131     1,070     (939)      (420)    1,519   (1,939)
                   -----------------------------  ---------------------------
                   -----------------------------  ---------------------------
    Loss before
     minority
     interest       (11,759)     (871) (10,888)   (10,456)   (4,702)  (5,754)
    Minority
     interest                      (4)       4                   (6)       6
                   -----------------------------  ---------------------------
    Net loss        (11,759)     (875) (10,884)   (10,456)   (4,708)  (5,748)
                   -----------------------------  ---------------------------

    Other Financial information

    Cash and cash
     equivalents     16,255
    Total
     long-term
     debt           204,065
    Shareholders'
     equity          89,776
    Cash flows
     from operating
     activities       5,677     7,976               8,123     8,490
    Net additions
     to Property,
     plant           (8,362)  (11,315)            (15,859)  (16,806)
     and equipment


    CONFERENCE CALL

    The company will hold a conference call to discuss its 2008 second quarter
results:

    Date:              August 13, 2008
    Time:              9:00 am Eastern Time (or 3:00 pm Paris time/
                       2:00 pm London time)

    Participants are invited to attend by connecting 10 minutes prior to the
call to the following:

    Audio webcast:     www.mecachrome.com or www.cnw.ca
    Dial-in:           (416) 644-3425

    Following a brief presentation, the company will address questions from
research analysts. Media and investors are invited to participate in
listen-only mode. The company will be available to address other questions
following the call.

    A replay of the conference call may be accessed by:

    Audio webcast:     www.mecachrome.com or www.cnw.ca
    Telephone:         (416) 640-1917 Pass code: 21279331#.
    

    About Mecachrome International Inc.

    Mecachrome is a leader in the design, engineering, manufacture and
assembly of complex precision-engineered components for aircraft and
automotive applications, including aerostructural and aircraft engine
components, high-end automobile engine components and motor racing engines.
Since 1937, Mecachrome has established a significant presence and global
reputation in certain high-precision sectors of the aerospace, automotive and
industrial equipment industries, providing services primarily to original
equipment manufacturers. The company currently operates 11 state-of-the-art
facilities, principally in France and Canada, and employs over 2,000
employees.

    Forward-looking statements

    All statements, other than statements of historical facts, included in
this news release are forward-looking statements or contain forward-looking
information (within the meaning of the Québec Securities Act and the Ontario
Securities Act). Although we believe that the expectations reflected in these
forward-looking statements and forward-looking information are reasonable,
these statements involve risks and uncertainties and are not guarantees of
future performance. We can give no assurance that these estimates and
expectations will prove to have been correct, and actual outcomes and results
may differ materially from what is expressed, implied or projected in such
forward-looking statements and forward-looking information. There are a number
of important risks and uncertainties that could, and often do, cause our
actual results to differ materially from those indicated or implied by
forward-looking statements and forward-looking information, including the
risks and uncertainties discussed in Mecachrome's Annual Information Form for
the year ended December 31, 2007. Given the uncertainty of forward-looking
statements and forward-looking information, investors are cautioned not to
place undue reliance on these statements and information. The forward-looking
statements and forward-looking information speak only as of the date made, and
Mecachrome expressly disclaims any intention or obligation to update or revise
any forward-looking statements or forward looking information, whether as a
result of new information, future events or otherwise, except as may be
required by applicable law.

    Note to readers: The consolidated interim financial statements and
Management's Discussion & Analysis of financial results are available on
Mecachrome's website at www.mecachrome.com or on www.sedar.com.




For further information:

For further information: Elina Tea, Director Investor
Relations/Corporate Finance, (514) 373-2009, etea@mecachrome.com

Organization Profile

MECACHROME INTERNATIONAL INC.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890