OAKVILLE, ON, May 15, 2013 /CNW/ - Vicwest Inc. (the "Company") (TSX: VIC, VIC.DB) today reported its financial results for the three months ended March 31, 2013, a period of unusually low market activity resulting from the convergence of a number of events that temporarily but significantly reduced volumes, particularly in its Westeel division.
These events included a temporary shift in the buying pattern in the agricultural retail space, a deferral of construction projects in Quebec as a result of the province's ongoing construction inquiry, and prolonged winter weather which further reduced demand in the agricultural retail chain, and delayed the start of the spring construction season.
"As indicated in our previous outlook, this was a very challenging quarter, with a series of negative events occurring over a compressed time frame," said Colin Osborne, President and CEO. "With the exception of sales of Insulated Metal Panels ("IMP"), which increased 57% on a period-over-period basis, lower volume flowed across all business lines, and led to lower gross profit and under-absorption of fixed costs. The good news is that these are temporary events and backlogs are now recovering including our grain storage equipment backlog increasing 43% since quarter end, March 31, 2013. We anticipate returning to more normal revenue and profitability run rates as the year progresses."
Consolidated Performance Summary3
| Three months ended
|Gross profit margin||10.6%||18.9%|
|Net loss per share (basic)||(0.31)||(0.11)|
|Net (loss) income excluding change in fair value of embedded derivative2||(5.7)||0.6|
|Dividend per share||0.15||0.15|
|Senior Net Debt to EBITDA1||1.4:1||2.0:1|
1EBITDA is calculated as earnings before finance expense, income taxes, depreciation, amortization and change in fair value of embedded derivative. EBITDA and EBITDA margin are non-IFRS measures.
2Net (loss) income excluding change in fair value of the embedded derivative is a non-IFRS measure.
3Prior period numbers have been re-stated due to the retrospective application of the IFRS pronouncements adopted in the first quarter of 2013.
The Company continues to execute on its growth strategies, and took a number of important steps in the quarter including:
- Completing the commercialization of Vicwest Building Products' new insulated metal panel ("IMP") plant in Little Rock, Arkansas.
- Launching its new enterprise resource planning system across Westeel on May 1, 2013 which will significantly improve business processes, and moreover, means that now the entire company is now on the SAP platform.
- Expanding Westeel's access to market by adding U.S. dealers and establishing sales and application engineering capabilities in Mumbai, India.
- Completing the optimization of Vicwest Building Products' western region manufacturing footprint which will increase plant efficiency and reduce overhead costs.
In a subsequent event, the Company acquired PTM Technology of Este, Italy which provides Westeel with state-of-the-art grain handling capabilities. This acquisition gives Westeel important new channels to market, increases margin capture on current and new business, and adds European manufacturing capability in close proximity to key growth regions. From a facility perspective, the PTM plant is highly automated, very cost competitive, and capacity can be easily expanded with minimal investment.
| Three months ended
|Vicwest Building Products||43.0||45.2|
|Vicwest Building Products||(7.1)||(5.6)|
4 Net loss before finance expense, income taxes and change in fair value of embedded derivative.
In the first quarter, Westeel remained profitable despite a 29.3% period-over-period decrease in revenue. The reduction in revenue primarily reflected lower grain storage equipment sales as a result of changes in the Canadian retail space, and severe weather conditions which further suppressed demand. As well, frac pond sales, which showed significant momentum in prior quarters, slowed significantly as a result of the disruption caused by the collapse of the dominant player in the market. This business is now returning to more normal levels, and backlog in key product areas, such as domestic and U.S. grain storage, is now above prior year.
Vicwest Building Products typically incurs a loss in the first quarter due to seasonality. This year the loss was further impacted by $1.1 million in one-time costs related to the plant optimization initiative in the Western region of Canada, which is now complete, and lower demand for ICI product in the Eastern region of Canada due in part to the ongoing construction inquiry in Quebec. Unusually severe weather and prolonged snow cover also impacted construction in all areas. This is reflected in the Canada wide construction starts data which indicates non-residential activity in the quarter was down 26% on a square footage basis compared to the prior period. IMP sales growth of 57% on a period-over-period basis provided a partial offset and further validated the Company's strategy of expanding IMP capacity in North American markets. Similar to Westeel, Vicwest Building Products is now seeing the return of more normal activity levels and backlogs.
The Board of Directors declared a second quarter dividend of $0.15 per share, payable on July 15, 2013 for shareholders of record on June 28, 2013. This is consistent with the quarterly dividends declared and paid in 2012.
With $62.2 million of unused availability under the senior revolving credit facility at quarter end, the Company continues to have adequate resources to fund its growth strategies. As a result of seasonality, the temporary events that impacted earnings in the first quarter and cash used to fund dividends, capital and intangible expenditures and working capital requirements, the Company had net debt of $89.2 million compared to $61.4 million at December 31, 2012 and $100.4 million at March 31, 2012. Senior net-debt-to-EBITDA1 was 1.4 to 1 at the end of the quarter compared to 0.3 to 1 at December 31, 2012 and 2.0 to 1 at March 31, 2012.
Management believes that the trends driving long term demand for the Company's products are positive and that the business will benefit from these trends because of its competitive advantages including strong customer relationships, extensive distribution networks, well recognized brands, and efficient operations. These trends include i) the growing global need for grain storage to increase crop yields in support of population growth, ii) higher and more volatile crop pricing, which improves the return on investment for grain storage, iii) a construction sector in North America which is in the early stages of recovery and iv) increasing demand for energy efficient building materials that can be installed at low cost such as insulated metal panels. The combination of the Company's inherent strengths, unique product offering and exposure to these markets provide good fundamentals to support long-term growth.
Management's immediate outlook remains consistent with that articulated in the December 31, 2012 MD&A: lower results early in the year due to a temporary but significant shift in domestic customer buying patterns at Westeel and challenging conditions in the Canadian building products market. The first quarter and early part of the second quarter have also been impacted by unusual weather across most of Canada and the northern U.S., including late season snowfalls that have reduced shipping, introduced more cautious buying behavior into the customer base, and delayed the start of the construction season.
"While the year will be bifurcated with stronger results in the second half, our outlook for the remainder of 2013 has improved in the past few weeks as a result of several factors," said Mr. Osborne. "These factors include: significant improvements in our backlog in recent weeks, early signs of resurgent construction activity in the United States, continued accelerating demand for our IMP product, stabilizing ownership in the domestic agricultural retail space, and of course increased activity in the domestic construction industry which was delayed by the late spring. Finally, we are also very positive about the inclusion of the newly acquired PTM product line in our offering, which increases our overseas business by approximately 75%, increases margin capture on all overseas business and opens up new channels for our grain storage and handling systems."
First Quarter Conference Call and Webcast
Vicwest Inc. will host its first quarter 2013 conference call and webcast on May 16, 2013 at 11:00 a.m. (ET). To participate in the teleconference, the numbers are 1-416-644-3415 or 1-877-974-0445. Callers are advised to call in five minutes in advance. To participate in the webcast, please visit www.vicwestinc.com.
About Vicwest Inc.
Vicwest Inc. is a leading North American manufacturer and distributor of engineered storage and handling systems for grain, fertilizer and liquid storage as well as building construction products for agricultural, institutional, commercial, industrial and residential markets. We operate through two strategically aligned divisions: Vicwest Building Products and Westeel. With approximately 7,000 customers, 1,200 dedicated employees and 34 business partners, the Company is positioned for growth in domestic and international markets. Vicwest Inc. is a member of the S&P/TSX SmallCap Index. For more information, visit www.vicwestinc.com.
Certain statements in this news release constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements include, but are not limited to, management's beliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "will", "expect", "intend", "estimate", "anticipate", "believe", "should", "plans" or "continue", or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those contemplated by such statements. Readers are encouraged to review the most recently filed Management's Discussion and Analysis and other disclosure documents filed by the Company with Canadian securities regulatory agencies and commissions. Readers are cautioned not to place undue reliance on the Company's forward-looking statements. The forward-looking statements contained herein are made as of the date of this press release and except as required by applicable law, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
SOURCE: Vicwest Inc.
President & Chief Executive Officer
Tel: (905) 469-5700