Neo Material Technologies reports second quarter 2008 financial results



    
    Second Quarter 2008 quarter-over-quarter highlights:
     -  Revenue increased 36% to a record US$83.5M
     -  EBITDA increased 8% to US$16.7M
     -  Net income increased 5% to US$7.9M
     -  Long-term debt reduced 66% to US$19.9M
     -  Return on capital employed at 30%
    

    TORONTO, Aug. 12 /CNW/ - Neo Material Technologies Inc. (TSX: NEM) (the
"Company") today reported its financial results for the three-month and
six-month periods ending June 30, 2008. Unless otherwise specified, all
currency amounts are expressed in U.S. dollars.
    For the three-month period ended June 30, 2008, the Company reported
record revenues of $83.5 million and net income of $7.9 million, or $0.08 and
$0.07 per share on a basic and fully diluted basis, respectively. Operating
income plus depreciation and amortization ("EBITDA") during the quarter was
$16.7 million. This compares to 2007 revenues of $61.5 million, net income of
$7.6 million, or $0.10 and $0.09 per share on a basic and fully diluted basis,
respectively, and EBITDA of $15.5 million. For the three months ended June 30,
2008 and 2007, the weighted average basic number of common shares outstanding
were 101,083,892 and 79,354,030, respectively.
    For the six-month period ended June 30, 2008, the Company reported a 34%
increase in revenues to $148.9 million and net income of $16.2 million, or
$0.16 and $0.15 per share on basic and fully diluted basis, respectively.
EBITDA during the first half of the year amounted to $33.2 million. This
compares to 2007 six-month revenues of $111.5 million and net income, EBITDA
and earnings per share of $14.0 million, $28.4 million and $0.18 and $0.16 per
share on a basic and fully diluted basis, respectively. For the six months
ended June 30, 2008 and 2007, the weighted average basic number of common
shares outstanding were 99,997,457 and 79,255,574, respectively.
    At June 30, 2008, the Company had $17.4 million in cash. Long-term debt
was $19.9 million at June 30, 2008, compared to $40.1 million at December 31,
2007. The $9.3 million obtained in the recent private placement (issued at
CDN$4.21 per common share) combined with the exercise of 1.21 million share
purchase warrants and the cash flow for the first six months of 2008 was used
to repay $21.2 million of long-term debt. Cash flow for the balance of 2008
and the anticipated exercise of 16.4 million share purchase warrants
generating approximately $40.7 million during the third quarter of this year,
should allow the Company to retire its debt. As a result, the Company is well
positioned with a strong and flexible balance sheet, which will enable it to
pursue growth opportunities that will complement its strong organic growth
profile.
    During the second quarter of 2008, Magnequench shipped a record 1,404MT,
a 22% quarter-over-quarter increase. Magnequench sales were positively
affected by an acceleration of customer orders prior to the Beijing Olympics.
AMR Performance Materials shipped 2,271MT, a small 2% decline compared to the
tonnage shipped in the same three-month period in 2007.
    Despite the challenging economic environment, the Company continues to
see strong demand for its products, in part because of their many
environmentally friendly applications. Neo powders assist in decreasing the
weight and improving the efficiency of a wide range of small motors. The
newest generation of energy efficient light bulbs and flat panel displays
utilize its rare earth products. The Company's research and development
program has a pipeline of promising applications to fuel future growth and
profitability.

    
    Magnequench
    $000's (except for quantity shipped)
                       ------------------------------------------------------
                                                                    Trailing
                            Q2       Q3       Q4       Q1      Q2     Twelve
                           2007     2007     2007     2008    2008    Months
    -------------------------------------------------------------------------
    Quantity Shipped
     (tonnes)             1,152    1,097    1,183    1,242    1,404    4,926
    -------------------------------------------------------------------------
    Revenues             29,738   31,963   35,571   35,562   40,867  143,963
    -------------------------------------------------------------------------
    Operating Income     11,977   12,566   13,070   10,806   11,422   47,864
    -------------------------------------------------------------------------


    AMR Performance Materials
    $000's (except for quantity shipped)
                       ------------------------------------------------------
                                                                    Trailing
                            Q2       Q3       Q4       Q1       Q2    Twelve
                           2007     2007     2007     2008     2008   Months
    -------------------------------------------------------------------------
    Quantity Shipped
     (tonnes)             2,308    1,882    2,315    2,156    2,271    8,624
    -------------------------------------------------------------------------
    Revenues             32,909   34,445   38,046   37,885   48,502  158,878
    -------------------------------------------------------------------------
    Operating Income      3,669    4,094    4,597    4,710    6,040   19,441
    -------------------------------------------------------------------------


    Consolidated
    $000's (except for quantity shipped)
                       ------------------------------------------------------
                                                                    Trailing
                            Q2       Q3       Q4       Q1       Q2    Twelve
                           2007     2007     2007     2008     2008   Months
    -------------------------------------------------------------------------
    Inter-segment sales  (1,113)  (3,314)  (7,725)  (7,959)  (5,917) (24,915)
    -------------------------------------------------------------------------
    Revenues             61,534   63,094   65,892   65,488   83,452  277,926
    -------------------------------------------------------------------------
    Operating Income     13,087   13,324   14,337   13,504   13,790   54,955
    -------------------------------------------------------------------------
    EBITDA(1)            15,481   16,031   17,182   16,418   16,738   66,369
    -------------------------------------------------------------------------
    Note: (1) The Company currently calculates EBITDA as operating income,
    plus depreciation and amortization. Formerly, the Company calculated
    EBITDA as earnings before interest, taxes, depreciation and amortization.
    

    "Our operational performance remained strong during the quarter while we
achieved yet another record volume sales quarter at our Magnequench division,"
noted Constantine Karayannopoulos, President & CEO. "We achieved strong
results in the face of export tax and raw material increases, inflationary
cost pressures as well as a strengthening of the Chinese Renminbi. We continue
to monitor global indicators, particularly in the United States, however, at
this time demand for our materials across all end markets is robust and we are
targeting additional new applications to further grow our business."
    Based on the current business climate and demand for its products,
management continues to have a positive outlook for the remainder of 2008.

    About Neo Material Technologies

    Neo Material Technologies is a producer, processor and developer of
neodymium-iron-boron magnetic powders, rare earths and zirconium based
engineered materials and applications through its Magnequench and AMR
Performance Materials business divisions. These innovative products are
essential in many of today's high technology products. Magnequench's neo
powders are used to produce bonded magnets, generally used in micro motors,
precision motors, sensors and other applications requiring high levels of
magnetic strength, flexibility, small size and reduced weight. Rare earth and
zirconium applications include catalytic converters, computers, television
display panels, optical lenses, mobile phones and electronic chips. The
Company is headquartered in Toronto, Canada and has approximately 1,300
employees in 15 locations, across 10 countries.

    Forward Looking Statements

    From time to time, the Company may publish forward-looking statements
relating to such matters as expected financial performance, business
prospects, technological developments, and development activities and like
matters. These statements involve risk and uncertainties, including but not
limited to the risk factors previously described. Actual results could differ
materially from those projected as a result of these risks and should not be
relied upon as a prediction of future events. Neo Material Technologies Inc.
undertakes no obligation to update any forward-looking statement to reflect
events or circumstances after the date on which such statement is made, or to
reflect the occurrence of unanticipated events.

    Teleconference Call

    Management will host a teleconference call on Wednesday, August 13, 2008
at 10:00 a.m. (Eastern Time) to discuss these results. Interested parties may
access the teleconference by calling (416) 644-3423 (local) or (800) 591-7539
(toll free long distance) or by visiting http://www.newswire.ca/webcast. A
recording of the teleconference may be accessed by calling (416) 640-1917
(local) or (877) 289-8525 (toll free long distance), and entering pass code
21278964 followed by the number sign until September 13, 2008 or by visiting
http://www.newswire.ca/webcast.

    Online Access

    The financial statements and the Management's Discussion and Analysis
will be posted to SEDAR (www.sedar.com) and available online at
www.neomaterials.com by Wednesday, August 13, 2008.

    Financial Results follow

    
    NEO MATERIAL TECHNOLOGIES INC.
    CONSOLIDATED BALANCE SHEETS
    (All figures in thousands of United States dollars)

                                                       June 30   December 31
                                                         2008        2007
                                                     (Unaudited)
    -------------------------------------------------------------------------
    ASSETS
    Current
    Cash                                             $   17,366   $   17,160
    Accounts receivable                                  43,731       32,919
    Inventories                                          73,540       68,892
    Future income tax asset                                 975          604
    Other current assets                                  4,946        4,408
    -------------------------------------------------------------------------
    Total current assets                                140,558      123,983
    -------------------------------------------------------------------------
    Property, plant and equipment                        50,822       50,175
    Patents and other intangible assets                  17,909       19,776
    Pension benefit asset                                 4,111        4,165
    Goodwill                                             37,620       37,620
    Other long-term assets                                5,538        4,559
    -------------------------------------------------------------------------
    Total assets                                     $  256,558   $  240,278
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current
    Bank advances and other short-term debt          $   30,321   $   25,668
    Accounts payable and other accrued charges           49,373       47,498
    Long-term debt due within one year                   17,500       17,500
    -------------------------------------------------------------------------
    Total current liabilities                            97,194       90,666
    -------------------------------------------------------------------------
    Long-term debt                                        2,442       22,594
    Future income tax liability                           1,082        1,419
    Accrued postretirement benefits                         624          625
    Other long-term liabilities                           9,591        9,603
    -------------------------------------------------------------------------
    Total liabilities                                   110,933      124,907
    -------------------------------------------------------------------------
    Non-controlling interest                              8,951        7,494
    Contingencies and commitments
    Shareholders' equity                                136,674      107,877
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity       $  256,558   $  240,278
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    NEO MATERIAL TECHNOLOGIES INC.
    CONSOLIDATED STATEMENTS OF INCOME AND DEFICIT
    (Unaudited - all figures in thousands of United States dollars, except
    per share information)

                              Three months ended           Six months ended
                                    June 30                     June 30
                              2008          2007          2008          2007
    -------------------------------------------------------------------------
    Revenues          $     83,452  $     61,534  $    148,940  $    111,510
    Costs of sales
      Costs excluding
       depreciation
       and
       amortization         56,702        38,068        98,007        68,789
      Depreciation
       and
       amortization          2,141         1,587         4,229         2,957
    -------------------------------------------------------------------------
    Gross profit            24,609        21,879        46,704        39,764
    Expenses
      Selling,
       general and
       administrative        9,202         7,174        15,978        12,781
      Depreciation and
       amortization            807           807         1,633         1,608
      Research and
       development             810           811         1,799         1,520
    -------------------------------------------------------------------------
                            10,819         8,792        19,410        15,909
    -------------------------------------------------------------------------
    Operating income
     before the
     undernoted             13,790        13,087        27,294        23,855
    Other expense
     (income)                    8            86          (151)         (175)
    Interest expense,
     long-term debt          1,501         2,563         2,961         4,940
    Interest expense,
     other                     751           345         1,146           600
    Foreign exchange
     loss (gain)               421          (280)          546          (227)
    -------------------------------------------------------------------------
    Income from
     operations before
     taxes,
     non-controlling
     interest and
     equity income of
     affiliate              11,109        10,373        22,792        18,717
    Income taxes             2,505         2,830         5,430         4,927
    -------------------------------------------------------------------------
    Income from
     operations before
     non-controlling
     interest and
     equity income
     of affiliate            8,604         7,543        17,362        13,790
    Equity income of
     affiliate                 227           194           283           402
    Non-controlling
     interest in
     earnings of
     subsidiaries             (920)         (169)       (1,457)         (194)
    -------------------------------------------------------------------------
    Net income for
     the period       $      7,911  $      7,568  $     16,188  $     13,998
    -------------------------------------------------------------------------
    Deficit,
     beginning of
     period                (73,287)      (60,541)      (81,564)      (67,009)
    Cumulative impact
     of adopting new
     accounting
     requirements for
     financial
     instruments                 -             -             -            38
    -------------------------------------------------------------------------
    Deficit, end of
     period                (65,376)      (52,973)      (65,376)      (52,973)
    -------------------------------------------------------------------------
    Net income per
     share, basic     $       0.08  $       0.10  $       0.16  $       0.18
    -------------------------------------------------------------------------
    Net income per
     share, diluted   $       0.07  $       0.09  $       0.15  $       0.16
    -------------------------------------------------------------------------
    Weighted average
     number of shares
     outstanding,
     basic             101,083,892    79,354,030    99,997,457    79,255,574
    -------------------------------------------------------------------------
    Weighted average
     number of share
     outstanding,
     diluted           109,379,793    93,320,981   108,721,022    93,061,871
    -------------------------------------------------------------------------



    NEO MATERIAL TECHNOLOGIES INC.
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Unaudited - all figures in thousands of United States dollars)

                                   Three months ended       Six months ended
                                         June 30                 June 30
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Operating Activities
    Net income for the period  $   7,911   $   7,568   $  16,188   $  13,998
    Add (deduct) items not
     affecting cash
      Depreciation and
       amortization                2,948       2,394       5,862       4,565
      Stock-based
       compensation expense        1,313         579         879         968
      Non-controlling
       interest in earnings
       of subsidiaries               920         169       1,457         194
      Accretion in carrying
       value of debt                 874         587       1,404         987
      Future income tax             (234)       (292)       (708)      (271)
      Equity income of
       affiliate                    (227)       (194)       (283)      (402)
      Accrued benefit expense         24          56          54        112
      Loss on disposal                 -           9           -          9
    Restructuring payment              -         (20)          -        (77)
    Net change in non-cash
     working capital balances
     related to operations        (5,953)    (10,163)    (15,287)   (20,200)
    -------------------------------------------------------------------------
    Cash provided by (used in)
     operating activities          7,576         693       9,566       (117)
    -------------------------------------------------------------------------
    Investing activities
      Acquisition of property,
       plant and equipment        (3,026)       (665)     (4,642)    (1,796)
      Other investments                -           -        (693)         -
      Cash acquired on
       consolidation
       of variable
       interest entity                 -         308           -        308
      Decrease in restricted
       cash                            -         271           -        269
    -------------------------------------------------------------------------
    Cash used in investing
     activities                   (3,026)        (86)     (5,335)    (1,219)
    -------------------------------------------------------------------------
    Financing activities
      Repayment of long-term
       debt                      (16,780)     (6,885)    (21,155)   (10,010)
      (Decrease) increase
       in bank advances and
       other short-term debt        (286)      5,926       4,653      9,043
      Cash received from
       repayment of
       shareholder's loan            145           -         145          -
      Issue of common shares      12,303       1,806      12,320      2,015
    -------------------------------------------------------------------------
    Cash (used in) provided
     by financing activities      (4,618)        847      (4,037)     1,048
    -------------------------------------------------------------------------
    Effect of exchange rate
     changes on cash                  (6)        (71)         12       (103)
    -------------------------------------------------------------------------
    Cash (used) provided
     during the period               (74)      1,383         206       (391)
    -------------------------------------------------------------------------
    Cash beginning of period      17,440       7,750      17,160      9,524
    -------------------------------------------------------------------------
    Cash end of period         $  17,366   $   9,133   $  17,366   $   9,133
    -------------------------------------------------------------------------



    NEO MATERIAL TECHNOLOGIES INC.
    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    (Unaudited - all figures in thousands of United States dollars)

                                  Three months ended        Six months ended
                                         June 30                 June 30
                                    2008        2007        2008        2007
    -------------------------------------------------------------------------
    Net income for the period  $   7,911   $   7,568   $  16,188   $  13,998
    Change in unrealized loss
     on derivatives designated
     as cash flow hedges,
     net of tax                     (122)          -         (39)          -
    -------------------------------------------------------------------------
    Comprehensive income for
     the period                $   7,789   $   7,568   $  16,149   $  13,998
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    %SEDAR: 00002061E




For further information:

For further information: Information Contact: Michael Doolan, Chief
Financial Officer, (416) 367-8588, ext.335, Website: www.neomaterials.com,
e-mail: info@neomaterials.com; Ali Mahdavi, Investor Relations, (416)
962-3300, ext. 225, e-mail: am@spinnakercmi.com

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