Novik inc. - Third quarter 2009 highlights

    
    - 33% decrease in sales to $4,872,000 as a result of the economic
      slowdown
    - 33% decrease in sales for the first nine months to $11,688,000
    - Increase in North American sales for the first nine months
    - $93,000 in net earnings compared with $917,000
    - Cumulative net loss of $99,000 compared with net earnings of $1,833,000
    

QUEBEC CITY, Nov. 20 /CNW Telbec/ - Novik inc. (NVK) releases today its results for the third quarter of fiscal year 2009. Ail amounts are expressed in Canadian dollars unless otherwise indicated.

    
    -------------------------------------------------------------------------
    NOVIK inc.
    for the periods ended
    September 30, 2009 and 2008
    (in thousands dollars,
     except for amounts             Third       Third     Year to    Year to
     per share)                   quarter     quarter        date       date
    -------------------------------------------------------------------------
                                     2009        2008        2009       2008
    -------------------------------------------------------------------------
                                        $           $           $          $
    Operating results

    Revenues                        4,872       7,239      11,688     17,393
    Gross margin                    1,993       3,032       4,493      7,130
    Income before depreciation,
     stock-based compensation,
     financial expenses and
     income taxes                     442       1,729         492      3,908
    Net income (loss)                  93         917         (99)     1,833
    Basic and diluted net
     income (loss) per share        0.002       0.020      (0.002)     0.040
    -------------------------------------------------------------------------


    ---------------------------------------------------
    NOVIK inc.

    (in thousands dollars,
     except for amounts          Sept. 30,    Dec. 31,
     per share)                      2009        2008
    ---------------------------------------------------
                                        $           $
    Financial position

    Total assets                   27,431      25,583
    Working capital                 1,904       3,175
    Total long-term
     financial liabilities          9,426       9,519
    Total liability                15,936      14,141
    Shareholder's equity           11,495      11,442
    Shareholder's equity
     per share                       0.24        0.24
    ---------------------------------------------------
    Number of shares
     outstanding               48,470,858  48,470,858
    ---------------------------------------------------
    

In relation to the numbers presented above, Mr. Gaudreau, Novik's President & CEO, stated that "the decrease in our sales since the start of 2009 may seem normal in comparison with the other manufacturers present in the construction materials market. However, the figures do not reflect what we have overcome since January 2009 at all. In fact, the signing of several major customers offering high potential in the near future allows us to be confident about a possible economic recovery. Despite the fact that these new customers have not generated a significant volume of sales so far, they have indicated to us that they will support our products once the economy turns around. The introduction of new unique exterior covering products on the market combined with the financial difficulties of some of our competitors make us confident about continuing our pace of sales growth during the coming years, despite Novik's first complete year of decreased sales since its creation."

REVENUES

During the course of the third quarter of fiscal year 2009, Novik recorded $4.9M in revenue compared with $7.2M during the same quarter of the previous fiscal year. This 33% decrease in sales can be attributed to the same factor explained in the previous quarter, which was that international deliveries to our distributors have decreased, given the current economic context. Our distributors are facing a difficult construction market in their respective countries, causing them to be safer in their inventory management, including Novik products. Despite a $2.5M decrease in sales in this market during the third quarter compared with that of the same quarter of the previous fiscal year, these distributors are still ready to support our product line. They are also encouraged by the introduction of our new products made during the third quarter and hope to resume growth in their sales with our products beginning next year.

Mr. Gaudreau added that "we believe that the decrease in our sales on the international market remains temporary, as several distributors have recently contacted us either to open up new markets or to solidify existing markets. Our recent participation in the Batimat international exhibition in France allowed us to meet several serious distributors showing a strong interest in supporting the Novik product line in their respective countries. The coming months will be important for properly planning our marketing strategies in these markets to benefit from increased sales in the next fiscal year."

However, Mr. Gaudreau precised that "North American sales since the beginning of fiscal year 2009 are nearly $650,000 higher than for the same period of the previous fiscal year. This sales growth in this territory is encouraging compared with most manufacturers in our industry. They have seen significant drops in their revenues in North America, with an average of nearly 30% compared to the previous year. Our marketing efforts in this territory since the start of the year, the financial difficulties of our competitors, and our more diversified product line since the introduction of two new products explain these results."

Novik's cumulative sales for the nine-month period amounted to $11.7M, compared with $17.4M for the same period of the previous year. This 33% decrease in sales is also explained by the aforementioned items.

    
    EARNINGS BEFORE INTEREST, STOCK-BASED COMPENSATION COSTS, TAXES,
    DEPRECIATION AND AMORTIZATION ("adjusted EBITDA")
    

Earnings before interest, stock-based compensation costs, taxes, depreciation, and amortization (adjusted EBITDA) is a measure that has no standardized meaning prescribed by Canadian generally accepted accounting principles. It is therefore considered to be a non-GAAP measure in Canada. Accordingly, the measure may not be comparable to similar measures presented by other issuers. This measure is presented and described in this management report in order to provide shareholders and potential investors with additional information regarding the company's liquidity and ability to generate funds to finance its activities.

For the third quarter of fiscal year 2009, adjusted EBITDA amounted to $0.4M, compared with $1.7M for the same period of the previous fiscal year. Adjusted EBITDA is lower compared with the same period of the previous year, given the lower business volume combined with an increase in our fixed cost structure and by Novik's higher selling expenses. Our increased fixed costs are explained by the higher depreciation of our fixed assets, given our investment plan carried out in 2008, which involved the addition of production equipment and the expansion of our plant. A larger sales team on the Canadian and US markets since June 2008, greater marketing efforts, and the addition of members to our marketing and customer service team to ensure that these marketing efforts are working properly also explain this increase.

For the nine-month period ended September 30, 2009, the adjusted EBITDA amounted to $0.5M compared with $3.9M for the same period of previous fiscal year.

NET INCOME

The company's net income for the third quarter of fiscal year 2009 amounted to $93,000, compared with a net income of $917,000 for the same quarter of the previous fiscal year.

For the nine-month period ended September 30, 2009, the net loss was $99,000, compared with net earnings of $1,833,000 for the same period of the previous fiscal year. Novik's net loss during this period would have been greater had it not been for the presence of forward exchange contracts used to hedge the appreciation of the Canadian dollar in relation to the US dollar. In fact, by obtaining forward exchange contracts at the beginning of 2009 at a rate of 1.26, Novik has been able to record realized and unrealized exchange gains of $1,005,000 since the start of the current fiscal year.

OUTLOOK

While continuing its marketing efforts in order to maximize current sales in a more difficult economic context, Novik must continue to be vigilant in controlling its costs. Thus, certain projects have been delayed, the approval of expenditures has been tightened, inventory management is being scrutinized more, and certain working teams have been reorganized to ensure sound financial management in the current situation. In addition, following a 60% increase in sales in October 2009 compared with the same period of the previous year, Mr. Gaudreau outlined that "we are also on the lookout to generate sales from subcontracting in a slower period in order to occupy our production space more. Since the end of September 2009, we started a subcontracting agreement with a major manufacturer in the Quebec region, and we feel that we will be able to achieve sales of more than $500,000 by the end of fiscal year 2009."

Mr. Gaudreau pointed out finally that "Novik's desire remains clear: to be ready once the economy recovers in order to reach Novik's full potential in the near future with its current product line."

About NOVIK

Novik (NVK) is a leader in the design, manufacturer and distribution of innovative polymer exterior siding and roofing coverings that replace traditional materials such as stone, brick or wood shingles. These products target the world-wide residential and commercial construction industry.

Forward-looking statements contained in this press release involve known and unknown risks, uncertainties or other factors that may cause actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

%SEDAR: 00022807EF

SOURCE Novik Inc.

For further information: For further information: Michel Gaudreau, President, (418) 878-6161, micgau@novik.com; Pascal Bouthot, CA, Vice-President, Finances, (418) 878-6161, pasbou@novik.com; Source: Novik inc.

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