Novik reaches record first-quarter sales

    
                        FIRST QUARTER 2010 HIGHLIGHTS

    - Record first-quarter sales at $3.9 M
    - 155% increase in North American sales
    - 46% sales growth in first quarter 2010
    - Net loss of $312,000 compared to $627,000
    

QUEBEC CITY, May 27 /CNW Telbec/ - Novik inc. (NVK) releases today its results for the first quarter of fiscal year 2010. All amounts are expressed in Canadian dollars unless otherwise indicated.

    
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    NOVIK inc.
    for the periods ended March 31, 2010 and 2009
    (in thousands dollars, except for amounts per          First       First
     share)                                              quarter     quarter
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                                                            2010        2009
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                                                               $           $
    Operating results

    Revenues                                               3,854       2,645
    Gross margin                                           1,219         965
    Income before depreciation, stock-based
     compensation, financial expenses and income
     taxes                                                    49          22
    Net loss                                                (312)       (627)
    Basic and diluted net income (loss) per share         (0.006)     (0.013)
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    NOVIK inc.

    (in thousands dollars, except for amounts per       March 31,    Dec. 31,
     share)                                                 2010        2009
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                                                               $           $
    Financial position

    Total assets                                          26,204      25,314
    Working capital                                          268       1,457
    Total long-term financial liabilities                 10,126      10,450
    Total liabilities                                     15,698      14,496
    Shareholder's equity                                  10,506      10,818
    Shareholder's equity per share                          0.22        0.22
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    Number of shares outstanding                      48,470,858  48,470,858
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During the course of the first quarter of fiscal year 2010, Novik recorded revenues of $3.9 M, compared to $2.6 M during the same quarter of the previous fiscal year. Mr. Gaudreau, Novik's president, is proud to announce that "this level of sales is a record for Novik during a first quarter, the best previous first quarter was $3.3 M in 2008. Novik's 46% sales growth in the first quarter compared to the same period of last fiscal year is located in Canada and the United States. The presence of new major distributors in these two countries and the introduction of innovative covering products in 2009 explain this growth."

Mr. Gaudreau adds "Novik has been successfully entering into strategic agreements with major Canadian and US distributors since 2008, ensuring better product penetration in these markets where our types of products are already known. We have managed to displace the competition through our innovation efforts in our product line. Our 155% growth in sales in these two countries compared to the same period in the previous year demonstrates the success achieved so far."

On the other hand, European deliveries are down, given the continuing difficult economic environment. However, it is worth noting that our Russian distributors had taken advantage of beneficial conditions during the first quarter of last year to replenish their inventories. This year, they decided to be more prudent and not make use of the offers presented to them, aiming instead to start their ordering period during the second quarter of the current year. We have begun to receive these orders as of today. We have continued our marketing efforts in this country, and recent visits to Europe have been conducted, resulting in the opening of distributors and continued business discussions with other distributors, promoting excess sales on this continent in 2010 compared to last year.

EARNINGS BEFORE INTEREST, STOCK-BASED COMPENSATION COSTS, TAXES, DEPRECIATION AND AMORTIZATION ("adjusted EBITDA")

Earnings before interest, stock-based compensation costs, taxes, depreciation, and amortization (adjusted EBITDA) is a measure that has no standardized meaning prescribed by Canadian generally accepted accounting principles. It is therefore considered to be a non-GAAP measure in Canada. Accordingly, the measure may not be comparable to similar measures presented by other issuers. This measure is presented and described in this management report in order to provide shareholders and potential investors with additional information regarding the company's liquidity and ability to generate funds to finance its activities.

Despite a higher level of sales during the period compared to the previous fiscal year, adjusted EBITDA was comparable. As previously explained, gross margin as a percentage was 4% lower, given the prices offered to our strategic distributors during this period combined with the stronger Canadian exchange rate in relation to the US dollar and the high cost of plastic. Mr. Gaudreau precises that "the decline in gross margin should be temporary. In order to encourage new distributors having high potential volume to join Novik, advantageous terms were given to allow them to build up an inventory of our products in their warehouses. This measure favoured the receipt of large orders in the first quarter in return for an introductory discount. This discount level is a short-term measure, and the signed agreements already specify the standard price level granted after the delivery of these introductory orders."

In addition, selling expenses were higher for the period, as increased sales generate higher transport costs in dollars.

NET LOSS

The company's net loss for the first quarter of fiscal year 2010 amounted to $312,000, compared to a net loss of $627,000 for the same quarter of the previous fiscal year. The company generally shows a net loss in its first quarter of each fiscal year. This situation is explained by cyclical fluctuations, as the first quarter is normally a quarter signifying a slow-down in sales compared to the second and third quarter.

OUTLOOK

Despite a difficult fiscal year 2009, Novik has had two consecutive quarters of sales growth compared to the same period of the previous fiscal year, and next quarter is expected to be in the same situation. In fact, sales for the month of April are nearly 50% higher than in April 2009, and the level of orders received for May is up.

The level of sales growth observed during the first quarter and in April shows the results achieved following our marketing efforts in the North American market since 2008. These marketing efforts have paid off so far and should allow Novik to resume with growth in its annual sales. The current economic environment remains fragile, but the return of a period of economic growth will benefit Novik, given that recently signed North American distributors are still not reaching the sales achieved in the years before 2009. We believe that Novik will be very well positioned in North America for the coming years.

We are continuing our canvassing efforts with major distributors in the United States and Europe, and we hope to turn these discussions into sales beginning in 2010. In addition, we are continuing to push our Novexpert program in Quebec, Ontario, and the Maritimes in order to better educate contractors and consumers about our products.

Lastly, we are always vigilant about returning to profitability for Novik. Despite the current exchange rate and the high price of raw materials, we have established an action plan to track the trends observed over the coming months and to take the actions necessary to correct any negative trends.

OTHER

Following the annual general meeting held this morning, the directors have approved the grant of 705,000 stock options available to directors and certain officers at $0.20 a share.

About NOVIK

Novik (NVK) is a leader in the design, manufacturer and distribution of innovative polymer exterior siding, roofing coverings and accessories that replace traditional materials such as stone, brick or wood shingles. These products target the world-wide residential and commercial construction industry.

Forward-looking statements contained in this press release involve known and unknown risks, uncertainties or other factors that may cause actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

%SEDAR: 00022807EF

SOURCE Novik Inc.

For further information: For further information: Michel Gaudreau, President, (418) 878-6161, micgau@novik.com; Pascal Bouthot, Vice-President, Finances, (418) 878-6161, pasbou@novik.com; Source: Novik inc.

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