TORONTO, April 29 /CNW/ - Samuel Manu-Tech Inc. (TSX - SMT), a leading North American industrial products and technology company, today reported results for the three months ended March 31, 2010.
2010 1st QUARTER SUMMARY
- Sales for the quarter decreased 16.3% compared to Q1 2009 due to lower
volumes and selling prices and the negative impact of the stronger
Canadian dollar on U.S. based sales
- Operating profit of $1.7 million for the quarter reflected a gradual
recovery in economic and market conditions
- Packaging segment reported an operating profit of $1.8 million
- Metal Processing segment generated an operating profit of $1.7 million
- Net loss of $0.3 million or $0.01 per share
"The Company has started to benefit from the gradual recovery in North American economic conditions, which, combined with the positive impact of higher margins and ongoing cost reduction efforts, has resulted in a return to profitability in most of our operating units," commented Mark C. Samuel, Chairman and CEO. "While we are pleased with these early positive signs of recovery and we are cautiously ramping up production levels in our plants, we look forward to higher and more consistent demand from our end use markets", he added.
Sales for the three months to March 31, 2010 were $162.2 million, which represents a decrease of $31.6 million or 16.3% from the $193.8 million achieved in the comparable period of last year. Notwithstanding the positive impact of increasing steel prices, sales were below last year's level reflecting lower overall volumes, lower selling prices and the negative impact of exchange on the translation of U.S. denominated sales. The reduction in volumes results primarily from the slowdown in the transportation, housing, non-residential construction, and forestry sectors. In addition, the stronger Canadian dollar had a negative impact on Canadian exports and U.S. based divisional sales in the first quarter as compared to the comparable period of last year. The average exchange rate of the U.S. dollar in the first quarter of 2010 was Cdn. $1.04 compared to Cdn. $1.25 in the first quarter of last year.
Operating profit for the first quarter amounted to $1.7 million compared to an operating loss of $13.1 million in the comparable quarter of last year with profits achieved in both the Packaging and Metal Processing segments. The operating profits reported by the U.S. operations were decreased due to the impact of the average foreign exchange rate of Cdn. $1.04 used in the conversion to Canadian dollars.
The Packaging segment achieved an operating profit of $1.8 million compared to an operating loss of $8.0 million in the comparable quarter of last year, with improvements in both Canada and the U.S. The improved profitability reflects the gradual recovery in economic conditions in North America and the impact of higher margins, as well as the positive impact of cost reduction and consolidation initiatives implemented last year. Margins were negatively impacted last year by the liquidation of higher costed inventories, and reduced production levels.
The Metal Processing segment generated an operating profit of $1.7 million compared to an operating loss of $2.5 million in the comparable quarter of last year, with improved profitability in all divisions except for roll formed products and steel pressure vessels. Both roll formed products and steel pressure vessel operations incurred a loss in the first quarter compared to profits last year reflecting lower volumes and a change in product mix. Carbon steel tubular operations posted a profit in the first quarter. Steel pickling operations also earned a profit in the first quarter reflecting higher overall volumes in both Canada and the U.S. and the positive impact of prior year downsizing. Stainless steel tubular operations achieved a breakeven in the first quarter of the current year compared to losses incurred in the prior year, with the improvement attributable to higher sales and pricing levels as compared to the same period last year.
Including corporate costs of $1.9 million, the total operating profit in the quarter was $1.7 million.
Net loss for the first three months of 2010 was $0.3 million or $0.01 per share, compared to a net loss of $9.1 million or $0.28 per share incurred in the comparable quarter of last year. The first quarter results last year included a pre-tax restructuring gain of $0.7 million ($0.5 million after tax) consisting of the balance of the gain on the sale of the equipment at the Scarborough, Ontario strapping manufacturing facility and which positively impacted earnings by $0.01 per share. There were no restructuring charges or gains in the first three months of 2010.
Overall cash used in operating activities was $4.9 million, compared to $78.7 million of cash generated last year. The change reflects increased requirements for non-cash working capital, partially offset by the lower loss compared to last year. Cash used in investing activities at $2.1 million was below last year's $3.5 million due to reduced spending on capital assets. Cash generated from financing activities amounted to $8.4 million in the first quarter compared to $64.1 million used last year. There was a net increase in long-term debt of $8.3 million this year as compared to a net reduction in long-term debt of $60.3 million in the first quarter of the prior year.
Working capital at March 31, 2010 was $185.5 million, an increase of $8.1 million from the year-end position of $177.4 million, with an increase in receivables and inventories offset in part by higher payables. Overall, the working capital ratio was 3.4 to 1, consistent with the year-end position, but increased compared to the end of the first quarter last year when it was 3.1 to 1.
The Company's net borrowings as at March 31, 2010 amounted to $96.4 million, an increase of $3.8 million from $92.6 million at December 31, 2009. This increase reflects the higher investment in working capital. Net borrowings to capitalization at the end of the quarter increased to 27.2% from 26.1% at the year-end position, but decreased compared to the first quarter last year when it was 29.8%.
The increase in carbon steel prices by North American steel mills that began in the second half of 2009 continued into the first quarter of 2010. These increases appear to have been driven mainly by higher steel input costs, slightly improved demand, lower imports, continued restricted steel mill production levels, as well as the end of the destocking process. Steel input costs have continued to increase principally for iron ore, coke and scrap. In addition, there are signs that overall demand has improved somewhat this year primarily due to increased demand in the automotive, heavy equipment and certain other major steel consuming industries. Steel mill capacity utilization also continued to increase as North American mills re-started capacity idled during the global downturn of 2008 and 2009. Capacity utilization rates increased from approximately 60% at the end of the fourth quarter in 2009 to approximately 70% at the end of the first quarter of 2010. There is concern that the rising prices may have a negative impact on the relatively weak construction sector and that some projects could be delayed. A major challenge for the Company is to successfully pass on the higher steel costs to customers as some competitors are keeping prices low in order to gain market share. The outlook is for continuing upward pressure on carbon steel pricing levels in the second quarter.
In addition, after remaining relatively unchanged in the fourth quarter of 2009 due to somewhat stable raw material and demand levels, stainless steel pricing levels also began to increase in the first quarter of 2010. The increases in stainless steel surcharges have been driven by rising nickel, molybdenum and scrap prices, reduced imports, increased exports and slightly increased demand. The outlook is for stainless steel pricing levels to continue to increase in the second quarter.
The Canadian dollar which strengthened relative to the U.S. dollar throughout all of 2009 continued to strengthen in the first quarter of 2010. This continued increase in the Canadian dollar relative to the U.S. dollar had a negative impact on the Company's results in the first quarter. Based on current economic forecasts it is anticipated that the Canadian dollar will remain strong for at least the short to medium term.
As a result of these overall improved market conditions and the positive impact of the Company's ongoing cost reduction initiatives, the Company posted a small loss in the first quarter which represents a significant improvement over the comparable period last year. Based on the current economic forecast the Company anticipates improved performance in the second quarter with a modest return to profitability.
($ millions except per share amounts) Three Months
Period ended March 31, 2010 2009
Net Sales $162.2 $193.8
Earnings (Loss) from Operations* $1.7 ($13.1)
Net Loss ($0.3) ($9.1)
Basic Loss per Share ($0.01) ($0.28)
Cash Flows From (Used In) Operating Activities ($4.9) $78.7
* before restructuring, interest and income taxes
The Company's First Quarter Report to Shareholders can be found on the Company's website at www.samuelmanutech.com and has been filed on SEDAR at www.sedar.com.
About Samuel Manu-Tech, Inc.
Samuel Manu-Tech Inc. (SMT-TSX) is a leading North American industrial products and technology company producing and distributing a wide range of steel, plastic and related industrial products and services from locations in Canada, United States and Mexico.
Forward looking information
Some of the statements contained in this release are forward-looking statements, such as estimates and statements that describe the Company's future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition or result to occur. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties. Actual results in each case could differ materially from those currently anticipated in such statements. We do not intend to update this information and disclaim any legal obligation to the contrary.
SOURCE SAMUEL MANU-TECH INC.
For further information: For further information: John D. Amodeo, Vice President and Chief Financial Officer, Samuel Manu-Tech Inc., 185 The West Mall, Suite 1500, Toronto, Ontario, M9C 5L5, Tel: (416) 626-2190, Email Address: email@example.com