Samuel Manu-Tech reports fourth quarter and full year 2008 results



    TORONTO, Feb. 27 /CNW/ - Samuel Manu-Tech Inc. (Samuel) (TSX - SMT), a
leading North American industrial products and technology company, today
reported results for the three months and year ended December 31, 2008.

    
    2008 SUMMARY

    -   Sales for the year rise 10.0% on acquisition contributions and
        start-up operations
    -   Operating profit up marginally. Gains early in the year offset by
        declines in the 4th Quarter reflecting the rapid reduction in steel
        selling prices, reduced market demand and negative inventory
        revaluations.
    -   Packaging segment operating profit up 17% in 2008
    -   Metal Processing segment operating profit declines 3.3% for the year
        due to significant decrease in fourth quarter
    -   Pre-tax non-cash impairment charge for goodwill and certain
        long-lived assets of $53.6 million taken in fourth quarter
    

    "Despite solid increase in sales and profitability through the first nine
months of the year, our businesses suffered from a rapid decline in steel
prices through the third and fourth quarters, as well as deteriorating
business levels in a number of our markets. These factors resulted in
significant inventory write downs", commented Mark C. Samuel, Chairman and
CEO. "In addition, the non-cash impairment charge against earnings taken in
the fourth quarter of the year reflects the reality of adverse equity market
conditions that caused a decrease in comparable company trading multiples and
the Company's stock price."

    Sales

    Sales for the fourth quarter ended December 31, 2008 were $236.6 million,
which represents an increase of $27.2 million or 13% over the $209.4 million
achieved in the comparable quarter of the prior year. The increase results
primarily from the contribution of recent acquisitions and start-up
operations. These positive factors more than offset the recent rapid decline
in selling prices and continued weaker end user demand in certain key sectors
resulting from the economic slowdown in North America and increased
competition. For the year ended December 31, 2008 sales increased 10% to
$989.7 million, with Packaging sales rising 1.9% and Metal Processing sales up
18.2%.

    Operating Performance

    In the fourth quarter, loss from continuing operations before goodwill
and long-lived assets impairment charges, gain on sale of steel pickling
operations, restructuring, interest and income taxes was $9.9 million compared
to an operating profit of $0.3 million in the comparable quarter of the prior
year. The operating loss reflects the rapid reduction in selling prices which
resulted in significant downward inventory valuation adjustments required to
write down inventories to their net realizable value. For the year ended
December 31, 2008, the Company generated an operating profit of $38.9 million,
an increase of 1.5% compared to the prior year.
    The Packaging segment had an operating loss of $7.4 million in the fourth
quarter, which was greater than the operating loss of $3.0 million in the
comparable quarter of the prior year. The operating loss resulted from the
negative impact of the rapid erosion of selling prices in the month of
December reflecting the significant reduction of demand in most key markets.
This in turn led to significant inventory devaluation adjustments, which more
than offset the increased operating efficiencies at the new steel strapping
facility in Ohio. For the year ended December 31, 2008 operating profit for
the Packaging segment rose 17.5% to $13.0 million, with increases in the U.S.
more than offsetting decreases in Canada. The increased profitability in the
U.S. reflected increased volumes and higher pricing levels for most of the
year. The decreased profitability in Canada reflected the continued slowdown
in the forestry and construction sectors and the negative effects from
increased competition.
    For the Metal Processing segment, fourth quarter operating profit
decreased to $0.5 million from $5.2 million in the comparable quarter of the
prior year. Stainless steel tubular operations generated an operating loss
reflecting a less favourable product mix and slowdowns at the U.S. and Mexican
operations. In addition, lower demand and selling prices led to required
inventory write downs in the month of December. Profits from steel pickling
operations were also down reflecting lower overall volumes due to the slow
down in North American manufacturing, particularly the automotive sector.
Profits from welded tubular assemblies were down due to lower sales of all
terrain vehicles. These decreases were offset in part by increased profits
from roll formed products reflecting increased sales levels, the positive
contribution from the U.S. operations and the recent acquisition of Omega
Joists Inc. Operating profits from steel pressure vessels and tubular
operations were also higher reflecting increased sales and the acquisition of
Tubular Products Company. "For the year ended December 31, 2008, operating
profit for the Metal Processing segment declined 3.3% to $36.0 million with
the deteriorating performance in the 4th Quarter detracting from the operating
profit gains in the first nine months of the year".
    The Company recorded a non-cash charge of $53.6 million, $38.7 million
after tax or $1.20 per share, for goodwill and certain long-lived assets
impairment as at December 31, 2008. The impairment charge was primarily driven
by adverse equity market conditions that caused a decrease in comparable
company trading multiples and the Company's stock price. The Company's market
capitalization as at December 31, 2008 was well below the carrying value of
its net assets, suggesting an impairment. In addition, actual operating
results in certain of the Company's reporting units have not met the Company's
forecasts for the year and the considerable economic uncertainty has led
management to lower forecast expectations for the purposes of the annual
impairment test. The non-cash impairment charge did not affect the Company's
liquidity, cash flows or debt covenants.
    The Company generated a net loss of $46.9 million for the fourth quarter
of 2008, or $1.46 per share. The fourth quarter results this year include a
restructuring gain of $0.5 million consisting primarily of a portion of the
gain on the sale of the equipment at the Scarborough, Ontario strapping
manufacturing facility. This restructuring gain of $0.3 million after tax
positively impacted earnings in the fourth quarter by $0.01 per share. Net
earnings for the comparable quarter in 2007 were $3.3 million or $0.10 per
share. The fourth quarter results last year included a restructuring gain of
$4.4 million ($3.8 million after tax) consisting primarily of the gain on the
sale of the land and building at the Scarborough, Ontario strapping
manufacturing facility and which positively impacted earnings by $0.12 per
share.
    Net loss for the year ended December 31, 2008 was $9.3 million or $0.29
per share compared to net earnings of $27.3 million or $0.85 per share last
year. The results this year include an estimated pre-tax gain of $15.2 million
related to the sale of the Nanticoke, Ontario steel pickling operations to
U.S. Steel Canada. This after tax gain of $10.4 million positively impacted
earnings for the year by $0.32 per share. The results this year also include a
pre-tax restructuring charge of $2.2 million related to the closure of the
Scarborough, Ontario strapping manufacturing facility. This restructuring
charge of $1.5 million after tax negatively impacted earnings by $0.05 per
share. This compares to the results last year which included a restructuring
charge of $1.6 million (nil after tax) and which had no net effect on earnings
per share.

    Financial Position

    Cash flow from operating activities from continuing operations for the
fourth quarter decreased to $7.8 million from $17.8 million in the comparable
quarter of the previous year reflecting lower earnings and increased
requirements for non-cash working capital. Working capital rose to $300.1
million, an increase of $59.8 million over the $240.3 million at December 31,
2007. Despite an increase in long term debt of $74.4 million from the prior
year reflecting increased spending on business acquisitions completed during
the year as well as higher investment in working capital, offset in part by
the proceeds on sale of capital assets, net debt to capitalization remained a
conservative 37.8% compared to 28.3% at the end of the prior year. Net debt to
capitalization includes the negative impact of the goodwill and long-lived
assets impairment charge as described earlier.
    For the full year, cash flow from operating activities from continuing
operations in 2008 amounted to $15.2 million which is down $1.4 million from
$16.6 million in the previous year. The decrease is attributable primarily to
increased requirements for non-cash working capital in the year.

    Outlook

    Carbon steel pricing levels decreased substantially in the second half of
the year after significant increases in the first half of the year. The impact
of various stimulus plans on the manufacturing sector is currently uncertain
and therefore the timing of any resultant increased market demand is difficult
to predict. The increases in the first half of the year were driven by reduced
imports and higher raw material input costs. The increases were more than
offset by the negative impact of a lack of demand in the second half of the
year. Recent production cuts by North American mills have helped to keep
supply and demand more in balance. However, with real demand remaining weak,
the expectation is for prices to remain at relatively low levels for at least
the first half of 2009.
    After the price declines in the fourth quarter of 2008, nickel prices
stabilized somewhat in early 2009. However, continuing weak demand and recent
declines in raw material costs will make it difficult for a recovery in
stainless steel pricing levels.
    Forecasts are complicated by the sharp North American and global economic
downturns, which could worsen as the year progresses. The Company will
continue to focus on maximizing liquidity and reducing its cost structure to
be able to deal with the negative market conditions.
    "Samuel Manu-Tech Inc. has not been immune to the economic crisis in
North America. We are disappointed with our results in the 4th Quarter and it
is difficult to be optimistic for a North American economic recovery in the
first half of 2009. In response to these conditions we are streamlining our
businesses and rapidly reducing our costs to ensure that SMT will both meet
the challenges of the current crisis and emerge well positioned to take
advantage of the opportunities that will inevitably arise", Mr. Samuel
concluded.

    
    Financial Highlights

    ($ millions except
     per share amounts)                 Three Months           Full Year
    Period ended December 31,         2008       2007       2008       2007
    -------------------------------------------------------------------------

    Net Sales                        $236.6     $209.4     $989.7     $899.9
    Earnings (loss) from
     Continuing Operations(*)         ($9.9)      $0.3       38.9       38.3
    Goodwill and Other Long-lived
     Assets Impairment Charge        ($53.6)         -     ($53.6)         -
    Gain on Sale of Steel
     Pickling Operations                  -          -      $15.2          -
    Net Earnings (loss) from
     Continuing Operations           ($46.9)      $3.3      ($9.3)     $21.3

    Net Earnings (Loss)              ($46.9)      $3.3      ($9.3)     $27.3

    Basic Earnings (Loss) per Share  ($1.46)     $0.10     ($0.29)     $0.85

    Cash Flows from Operating
     Activities                        $7.8      $17.8      $15.2      $16.6

    (*) before impairment charge,
        gain on sale of steel
        pickling operations,
        restructuring, interest
        and income taxes
    

    The Company's Fourth Quarter Report to Shareholders can be found on the
Company's website at www.samuelmanutech.com. The Company's 2008 Annual Report
to Shareholders will be filed on SEDAR before the end of March, 2009 and will
be available on the Company's website and at www.sedar.com at that time.

    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.

    %SEDAR: 00002004E




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:
smt@samuelmanutech.com

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SAMUEL MANU-TECH INC.

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