OAKVILLE, ON, May 7, 2014 /CNW/ - Vicwest Inc. (the "Company") (TSX: VIC, VIC.DB and VIC.DB.A) today reported its financial results for the three months ended March 31, 2014.
Consolidated Performance Summary
| Three months ended
|($ millions except per share and margin)||2014||2013|
|Gross profit margin||9.7%||10.6%|
|Adjusted EBITDA Margin2||(3.1)%||(2.9)%|
|Net loss per share (basic and diluted)||(0.18)||(0.31)|
|Net loss excluding change in fair value of embedded derivative and other expense3||(6.0)||(5.7)|
|Net loss per share excluding change in fair value of embedded derivative and other expense3||(0.35)||(0.31)|
|1EBITDA is calculated as earnings before finance expense, income taxes, depreciation, amortization, change in fair value of embedded derivative and other expense. EBITDA and EBITDA margin are non-IFRS measures.|
|2Adjusted EBITDA and Adjusted EBITDA Margin represent EBITDA adjusted to exclude non-recurring income and expenses in 2014 and 2013 and are generally considered more indicative non-IFRS measures of underlying business performance than EBITDA. See MD&A for reconciliation to EBITDA.|
|3 Net income (loss) excluding change in fair value of embedded derivative and other expense and net income (loss) per share excluding change in fair value of the embedded derivative and other expense are non-IFRS measures.|
|4 Backlog represents the total value of work that has not yet been completed that: (a) has a high certainty of being performed as a result of the existence of an executed contract or work order specifying job scope, value and timing; or (b) has been awarded to the Company, as evidenced by an executed binding letter of intent, project plan or agreement, describing the general project scope, value and timing of work. Backlog is a non-IFRS measure.|
"The first quarter unfolded as expected with strong growth in revenue at Westeel offset at the margin level by the consolidated impact of steel cost increases of $1.8 million that have yet to pass through at the retail level," said Colin Osborne, President and CEO. "We have adjusted pricing within both divisions to account for these higher input costs and the benefits should be realized once committed backlogs from last fall clear in the second quarter. At Vicwest Building Products, despite challenging weather conditions, we've experienced modest revenue growth as a result of continued expansion in the North American IMP market and additional decking sales, realized in the current year as a result of our recent RFG acquisition. As well, year-over-year we began to realize improvements in operational leverage from the recent rationalization of our Canadian building products footprint."
| Three months ended
|Vicwest Building Products||44.4||43.0|
|Net income (loss)6|
|Vicwest Building Products||(6.3)||(7.1)|
|6 Net income (loss) before finance expense (net), income taxes and change in fair value of embedded derivatives. This is a non-IFRS measure.|
For the first quarter of 2014, Westeel's revenue increased $10.7 million or 35.8% compared to the first quarter of 2013 due to increased sales of grain storage products which more than offset a decrease in liquid storage products. Despite solid revenue growth, Westeel's net income was lower than a year ago due to higher steel costs (which reduced net income by $1.1 million), steel supply shortages which resulted in costly steel substitutions and increased freight costs, and deferred purchase consideration of $0.6 million expensed in the quarter as part of the prior year acquisition of PTM. The backlog for Westeel in the first quarter of 2014 increased $40.6 million or 89.7% compared to year-end.
Vicwest Building Products revenue in the first quarter increased 3.3% compared to the first quarter of 2013 on a 30% year-over-year increase in North American IMP sales and additional decking sales as a result of the RFG acquisition. Backlog in the first quarter of 2014 increased $3.9 million or 12.5% compared to year-end. The division typically incurs a loss in the first quarter due to seasonality in the construction industry. This year the loss was reduced by 11% year over year due to increased IMP sales volume within our Little Rock, Arkansas plant more adequately covering fixed costs, partially offset by higher steel costs of $0.7 million. As well, results in the first quarter of 2013 included optimization costs of $0.7 million for Canadian operations that did not recur in the first quarter of 2014.
The Board of Directors declared a second quarter dividend of $0.15 per share, payable on July 15, 2014 for shareholders of record on June 30, 2014. This is consistent with the quarterly dividends declared and paid in 2013.
The Company continues to have adequate resources to fund its growth and improvement strategies. As planned, the newly implemented Asset Based Lending ("ABL") credit facility has provided the Company with the financial flexibility needed to more effectively manage commodity price risk and implement hedging strategies to help mitigate input cost volatility. At March 31, 2014, the Company was well within the excess availability thresholds of the ABL.
As a result of the normal seasonal increase in working capital, cash used to fund the asset acquisition of the Roll Form Group, as well as dividends and capital expenditures, the Company had net debt of $119.3 million at March 31, 2014 compared to $92.8 million at December 31, 2013.
Management believes there are a number of fundamental trends which continue to drive demand for the Company's products including strong and growing global demand for grain storage systems and a non-residential construction sector that is nearing the end of a long downturn. These fundamentals are supported by the Company's strong customer relationships, extensive distribution networks, well recognized and respected brands, and efficient operations.
It is expected that through the remainder of 2014 the Company will continue to benefit from: i) a significant increase in backlog at Westeel which, by the end of the first quarter has increased to record levels, ii) continued growth in North American IMP sales and backlog and iii) Westeel's continued expansion into international markets with fully integrated product offerings and a manufacturing presence in Europe, which has allowed the division to expand its product reach and globally diversify its customer base.
These points of positive outlook continue to be tempered by the fact that management expects Canadian non-residential construction to experience only modest growth through 2014. As well, due to the strengthening U.S dollar and unforeseen North American steel supply challenges, steel cost increases continue to put pressure on product margins within both divisions. Product price increases have been implemented but the full benefit of these price increases won't be realized until late in the second quarter, and only after committed backlogs have cleared.
At Westeel, low retail inventory, high carry-over stocks, and challenges associated with moving grain through the end of 2013 have resulted in increasing customer demand for agricultural storage products. Order intake through the first quarter of 2014 has more than doubled compared to last year. This has resulted in the first quarter ending with order backlog reaching an all-time high of $85.9 million, 89.7% higher than the backlog recorded at December 31, 2013. Included in this backlog are a number of international projects which have provided significant load to our PTM facility in Italy, and which are expected to be delivered in the second half of 2014 and through the 2015 fiscal year. Though overall demand is at record levels, Westeel continues to effectively manage and increase capacity. However they have been impacted by steel supply issues as a result of disruptions at supplier plants. To date, these shortages have been remedied through steel substitution, which has negatively impacted cost. The division is currently sourcing new suppliers which are expected to be in place by the end of the second quarter and will build adequate safety stock during the third quarter.
At Vicwest BP, the first quarter and early part of the second quarter of 2014 continues to be impacted by adverse weather conditions resulting in lower than expected industrial, commercial and institutional construction activity across Canada. This is reflected in construction starts which were down 44% in the first quarter compared to prior year. Going forward, expectations continue to be for a modest improvement in the seasonal volume of domestic construction activity combined with continued double digit growth in insulated metal panel sales, which were up 30% on a year-over-year basis. With the completed asset acquisition of RFG, it is expected that the division will continue to capitalize as a result of its increased presence within a consolidated Canadian market and expanded product catalogue. As well, with all facility rationalizations complete, it is expected that margins within the Canadian operations will improve under current production levels and increasingly as volumes increase.
As expected, the newly implemented ABL credit facility has provided the Company with the financial flexibility needed to more effectively manage commodity price risk and implement hedging strategies to help mitigate input cost volatility.
First Quarter Conference Call and Webcast
Vicwest Inc. will host its first quarter 2014 conference call and webcast on May 8, 2014 at 10:00 a.m. (ET). To participate in the teleconference, the numbers are 1-416-644-3417 or 1-877-974-0446. 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 manufacturer and distributor of engineered storage and handling systems for grain, fertilizer and liquid storage as well as building construction products for agriculture, 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, we are 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.
For further information:
President & Chief Executive Officer
Tel: (905) 469-5700
Chief Financial Officer
Tel: (905) 469-5706