Shermag reports second quarter results



    SHERBROOKE, QC, Nov. 12 /CNW Telbec/ - Shermag Inc. (TSX: SMG), today
reported its results for the second quarter and first half ended September 28,
2007. All dollar amounts are Canadian denominated unless otherwise indicated.
    Consolidated gross revenue for the second quarter totalled $27.2 million,
down 40% from consolidated sales of $45.5 million for the corresponding period
last year. Net revenue was $25.6 million, a 40% reduction from the
$42.5 million posted a year ago. Net loss for the quarter was $3.7 million or
$0.28 per fully diluted share, compared to a net loss of $1.1 million or
$0.09 per fully diluted share a year earlier.
    For the six months, the Company posted consolidated gross revenue of
$58.3 million, compared to $91.3 million for the six months last year, a
decrease of 36%. Net revenue was $54.9 million, down 35% from last year's
first half net revenue of $85 million. The net loss for the first six months
was $7.6 million or $0.57 per fully diluted share, compared to last year's net
loss for the same period of $5.5 million or $0.41 per fully diluted share.
    In the second quarter, Canadian sales fell nearly 15% from $13.8 million
to $11.8 million year-over-year. In US dollars, exports declined 47% from
$28.2 million to $14.8 million. In Canadian dollars, the value of exports fell
51% to $15.4 million or 57% of gross revenue. The average exchange rate
applied to the second quarter financial results was CA$1.04/US$, compared to
CA$1.123/US$ for the same period last year.
    For the six months, Canadian sales fell 15% from $29.1 million to
$24.7 million year-over-year. Exports expressed in US dollars declined 43%
from $55.2 million to $31.2 million. In Canadian dollars, the value of exports
fell 46% to $33.7 million or 58% of gross revenue. The average exchange rate
applied to the first half financial results was CA$1.08/US$, compared to
CA$1.127/US$ for the same period last year.


    
    Full results for the second quarter and six months ended September 28,
2007 were as follows:

    Comparative results - 2nd Quarter
    -------------------------------------------------------------------------
    (in thousands of dollars,                      2nd Quarter   2nd Quarter
     except per share data)                          2007-2008     2006-2007
    -------------------------------------------------------------------------
    Gross revenue                                    $  27,199     $  45,523
    -------------------------------------------------------------------------
    Gross earnings (1)                               $   3,386     $   6,657
    -------------------------------------------------------------------------
    Loss before income taxes                         $  (4,939)    $  (1,831)
    -------------------------------------------------------------------------
    Net loss                                         $  (3,688)    $  (1,147)
    -------------------------------------------------------------------------
    Loss per common share - basic                    $   (0.28)    $   (0.09)
    -------------------------------------------------------------------------
    Loss per common share - diluted                  $   (0.28)    $   (0.09)
    -------------------------------------------------------------------------
    Exports                                          $  15,432     $  31,712
    -------------------------------------------------------------------------
    (1) Excluding amortization


    Comparative results - 1st Semester
    -------------------------------------------------------------------------
    (in thousands of dollars,                     1st Semester  1st Semester
     except per share data)                          2007-2008     2006-2007
    -------------------------------------------------------------------------
    Gross revenue                                    $  58,346     $  91,333
    -------------------------------------------------------------------------
    Gross earnings (1)                               $   7,029     $  10,283
    -------------------------------------------------------------------------
    Loss before income taxes                         $ (10,734)    $  (8,189)
    -------------------------------------------------------------------------
    Net loss                                         $  (7,623)    $  (5,526)
    -------------------------------------------------------------------------
    Loss per common share - basic                    $   (0.57)    $   (0.41)
    -------------------------------------------------------------------------
    Loss per common share - diluted                  $   (0.57)    $   (0.41)
    -------------------------------------------------------------------------
    Exports                                          $  33,695     $  62,213
    -------------------------------------------------------------------------
    (1) Excluding amortization
    

    Gross profit (excluding amortization) in the second quarter decreased 49%
year-over-year, from $6.7 million to $3.4 million. This decrease is mainly
attributable to the decline in sales volume experienced in the quarter and to
the appreciation of the Canadian dollar versus the US currency. For the six
months, gross profit declined from $10.3 million to $7 million or 32%
year-over-year.

    Outlook

    The Company's transformation program, which includes consolidation of its
domestic manufacturing units, increased global sourcing, and increased quality
and pricing levels for custom-manufactured domestic products, has generated
important economies however, the weak US dollar and difficult market
conditions necessitate additional measures to further reduce costs and better
reflect the Company's current levels of revenue and gross margins.
    Shermag President and CEO, Jeff Casselman, said the Company's results
continue to be affected by the high Canadian dollar and the soft US housing
market. "The Canadian dollar continues to move against us at an unprecedented
rate. At the close of the second quarter the Canadian dollar had reached
parity with the US dollar and has since closed as high as $1.08 versus the
US dollar. This will further affect our results as additional increases in
pricing may further impact our revenues. We are pursuing all efforts to align
our fixed costs in face of the potent combination of the weakened US dollar
and lower sales. Notwithstanding the focus on managing our cost structure,
additional measures are required. As such, the Company's Board has initiated a
complete review of all operations."

    Profile

    Shermag Inc. (SMG), headquartered in Sherbrooke, Québec, is a leader in
the design, production, marketing and distribution of high-quality residential
furniture. The Company employs about 1,100 people and is a vertically
integrated manufacturer and importer with its own cutting rights, sawmill,
veneer plant, manufacturing operations and global sourcing division.

    Disclaimer

    This news release, in particular the section under the heading "Outlook",
contains forward-looking statements about the Company's operations,
objectives, strategies, financial situation and performance. These statements
are made based on assumptions and management's best estimates with regard to
future events. However, the business of the Company is subject to risks and
uncertainties that could cause actual results to differ from expected results.
Important factors that could cause such differences are changes in pricing
pressure being exerted by competitors, particularly Asian-based companies,
significant movement in the Canadian/US dollar exchange rate, and
unanticipated problems in implementing the Company's Business Transformation
Plan. This is not an exhaustive list. A broader discussion of risk factors
that could affect future performance can be found in the Company's Annual MD&A
and Annual Information Form, filed with Canadian securities regulatory
authorities. Given these risks and uncertainties, investors should not place
undue reliance on forward-looking statements as a prediction of actual
results. The Company disclaims any intention or obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.




For further information:

For further information: Investor Relations: Rick Leckner, Maison
Brison, (514) 731-0000; Jeff Casselman, President and CEO, Shermag Inc., (819)
566-1515

Organization Profile

SHERMAG INC.

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