TerraVest announces third quarter results for fiscal 2016

VEGREVILLE, AB, Aug. 12, 2016 /CNW/ - TerraVest Capital Inc. (TSX: TVK) ("TerraVest" or the "Company") an industrial manufacturer of fuel containment and pressure vessels as well as an oil field service provider is pleased to announce its results for three and nine months ended June 30th, 2016.

The third quarter is generally TerraVest's slowest quarter, on a seasonal basis, however the dramatic reduction in oil and gas activity has further impacted the western Canadian business segments. TerraVest's non-oil and gas exposed business segment, the Fuel Containment division, continues to perform well and the Company maintains a well-capitalized balance sheet. In addition, TerraVest continues to evaluate opportunities that arise as a result of the oil and gas downturn as well as other opportunities to augment its existing portfolio of businesses.

Highlights in the quarter include:

Revenues of $36,016 for the quarter down 22% from the comparable period in fiscal 2015;

Adjusted EBITDA of $1,456 down 80% from the comparable period in fiscal 2015;

Acquired 54.9% of Segretech Inc., a privately held manufacturer of oil and gas desanding equipment. 

"Despite facing one of the most challenging oil and gas downturns in modern times, TerraVest continues to benefit from the diversification of its business segments.  We are in a strong position to manage this downturn and take advantage of opportunities as they arise. We are excited about our most recent investment in Segretech Inc. and we remain confident in the long term value that will accrue to TerraVest" said Charles Pellerin, Executive Chairman of TerraVest.

 



Three months ended June 30

Nine months ended June 30


2016

2015

2016

2015


$

$

$

$

Sales

36,016

46,305

135,193

140,750

Cost of sales

30,833

35,556

107,603

107,566

Gross profit

5,183

10,749

27,590

33,184

General and administration expenses

4,963

5,134

14,903

14,202

Selling expenses

1,233

1,008

3,503

2,807

Financing costs

833

973

2,583

2,186

Impairment charges

-

882

-

882

Operating income

(1,846)

2,752

6,601

13,107

Gain on sale of property, plant and equipment

(1,832)

(332)

(1,897)

(513)

INCOME BEFORE INCOME TAXES

(14)

3,084

8,498

13,620

Income taxes

(4)

846

2,336

3,598

Net Income

(10)

2,238

6,162

10,022

Allocated to non-controlling interest

194

55

261

415

Net income available to common shareholders

(204)

2,183

5,901

9,607

Weighted average shares outstanding - Basic

18,305,789

18,079,495

18,246,447

18,089,837

Weighted average shares outstanding – Diluted

18,305,789

21,119,641

21,083,359

21,120,140

Earnings per share – Basic

(0.01)

0.12

0.32

0.53

Earnings per share – Diluted

(0.01)

0.12

0.32

0.47

Net income

(10)

2,183

5,901

9,607

Add (subtract):





Income taxes

(4)

846

2,336

3,598

Financing costs

833

973

2,583

2,186

Amortization and depreciation

2,469

2,678

7,345

8,023

EBITDA

3,288

6,735

18,426

23,829

Impairment of property, plant and equipment

-

882

-

882

Loss (gain) on disposal of property, plant and equipment

(1,832)

(332)

(1,897)

(513)

Adjusted EBITDA

1,456

7,285

16,529

24,198

 

TerraVest's third quarter ended June 30th, 2016 saw a decrease in revenue of approximately 22% versus the comparable period ended June 30th, 2015. Adjusted EBITDA decreased by approximately 80% in the same period. While revenue continues to be impacted by the challenging oil and gas environment, demand for certain Fuel Containment segment products remains strong allowing TerraVest to benefit from its diversification strategy. EBITDA declines were primarily the result of declines in the Fabrication and Service Segments.

Outlook

Fiscal 2016 has been materially impacted by the low prices in the oil and gas industry. Management has little foresight into the timing of recovery and expects both the Fabrication and Service segments to operate in challenging environments through to the end of the fiscal year. TerraVest's Fuel Containment segment has performed well year to date, as a result of strong demand for its residential and commercial fuel tanks. Management expects the trend to continue with these product lines, but cautions that demand for its propane truck product line has slowed due to the unseasonably warm weather to date. TerraVest has a strong balance sheet and is well-positioned to capitalize on opportunities that arise as a result of the downturn and is actively looking to do so.

The Fuel Containment segment's residential and commercial heating tanks, both metal and fiberglass have performed well to date and Management expects this trend to continue as depressed oil prices generally results in increased demand for these products. Sales of these products grew by 15% in the quarter and by 13% year-to-date. Most recently, the Fuel Containment segment developed the capability to assemble larger propane trailers out of its U.S. facilities (in addition to assembly of Bobtail propane trucks). Management expects that these additional capabilities will only enhance the segment's long-term growth prospects for propane related products in the U.S. The current backlog in the Fuel Containment segment's propane tank business is approximately $9,758.

The Fabrication segment continues to experience pricing pressures, project cancellations or deferrals from certain of its customers paralleling the state of the oil & gas market. As business activity in Western Canada has slowed to a crawl, management has taken the opportunity to improve manufacturing processes through investment in equipment and changes to our plant work flow. These changes should result in cost rationalization, shorter lead times and increased capacity that will persist beyond an eventual recovery in oil prices. The Fabrication segment's backlog is approximately $10,588 which is approximately 49% lower than last year. During this downturn the Fabrication segment has, and, will continue to, look for promising investments which complement its existing offering.

The Service segment's results in the nine months ended June 30, 2016 were weaker than the prior year's comparable period as a result of pricing pressures and reduced activity due to the continued depressed oil and natural gas prices. Although this segment has faced pricing pressure from its major customers, management is working diligently to maintain rig utilization levels and reduce operating costs. The Service segment is a resilient business and as oil companies cut their capital budgets an emphasis is placed on well optimization which helps mitigate the cyclicality for this segment. We expect the remainder of the year to be challenging for the Service segment.  

Dividend

TerraVest is also pleased to announce that The Board of Directors has declared its quarterly dividend of 10 cents per share upon the outstanding Common Shares in the capital stock of the Company being payable on October 11, 2016 to shareholders of record as at the close of business on September 30, 2016. The ex-dividend date is September 28, 2016. The dividend is designated an "eligible dividend" for Canadian income tax purposes.

Additional information can be found in TerraVest's unaudited interim condensed consolidated financial statements and MD&A which are available on SEDAR at www.sedar.com.

Caution Regarding Forward-Looking Statements

This news release contains forward-looking statements.  All statements other than statements of historical fact contained in this news release are forward-looking statements, including, without limitation, statements regarding our strategic direction and evaluation of the business segments and TerraVest as a whole, and other plans and objectives of or involving TerraVest. Readers can identify many of these statements by looking for words such as "expects" and "will" and similar words or the negative thereof. Although management believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.

By their nature, forward-looking statements require us to make assumptions and, accordingly, forward looking statements are subject to inherent risks and uncertainties. There is significant risk that the forward-looking statements will not prove to be accurate. We caution readers of this news release not to place undue reliance on our forward-looking statements because a number of factors may cause actual future circumstances, results, conditions, actions or events to differ materially from the plans, expectations, estimates or intentions expressed in the forward-looking statements and the assumptions underlying the forward-looking statements. 

Assumptions and analysis about the performance of TerraVest as a whole and its business segments, the markets in which the business segments compete and the prospects and values of the business segments are considered in setting the business plan for TerraVest, plans and/or ability to pay dividends, outlook for operations, financial position, results and cash flow, other plans and objectives and in making related forward-looking statements. Such assumptions include, without limitation, demand for products and services of the business segments in respect of the Canadian and other markets in which the businesses are active will be stable, and that input costs to business segments do not vary significantly from levels experienced historically. Should any of these factors or assumptions vary, actual results may differ materially from the forward-looking statements.

The information set forth under "Risk Factors" in the annual information form of TerraVest dated December 10, 2015 and under "Risk Factors" in the MD&A of TerraVest for the year ended September 30, 2015, identifies risk factors that could affect the operating results and performance of TerraVest and its business segments and the values of the business segments and TerraVest as a whole. We caution that the lists of factors discussed in such information is not exhaustive and that, when relying on forward-looking statements to make decisions with respect to TerraVest, investors and others should carefully consider the factors discussed, as well as other uncertainties and potential events, and the inherent risks and uncertainties of forward-looking statements.  The forward-looking statements herein are made based on the assumption that TerraVest will not be affected by such risks, but that, if TerraVest is affected by such risks, the forward-looking statements may become inaccurate.

The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement.  The forward-looking statements included in this news release are made as of the date of this news release.  Except as required by applicable securities laws, TerraVest does not undertake to update such forward-looking statements.

Non-GAAP Financial Measures

For Non-GAAP financial measures please refer to the definitions outlined the TerraVest Management's Discussion and Analysis dated December 10, 2015.

 

SOURCE TerraVest Capital Inc.

For further information: Mitchell Gilbert, TerraVest Capital Inc., Chief Investment Officer, (416) 364 -0064, mitchell.gilbert@terravestcapital.com, OR, Paul A. Casey, CA, TerraVest Capital Inc., Chief Financial Officer, (780) 632-2040, pcasey@terravestcapital.com

RELATED LINKS
www.terravestindustries.com

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