OAKVILLE, ON, Aug. 6, 2014 /CNW/ - Vicwest Inc. (the "Company") (TSX: VIC, VIC.DB and VIC.DB.A) today reported its financial results for the three and six months ended June 30, 2014.
Consolidated Performance Summary
| Three months ended
| Six months ended
|($ millions except per share)||2014||2013||2014||2013|
|Gross profit margin||15.3%||16.3%||12.9%||13.8%|
|Adjusted EBITDA Margin1||5.5%||7.1%||1.8%||2.8%|
|Net income (loss)||(2.4)||0.7||(5.6)||(4.9)|
|Net income (loss) per share (basic and diluted)||(0.16)||0.02||(0.33)||(0.28)|
| Net income (loss) attributable to shareholders excluding
change in fair value of embedded derivatives, unrealized loss
on forward contracts and other expense1
| Net income (loss) per share excluding change in fair value of
embedded derivatives, unrealized loss on forward contracts
and other expense1
|Dividend per share||0.15||0.15||0.15||0.15|
The second quarter was in line with expectations with improving trends across all business segments driven by improving margins and reductions in operating costs and SG&A. Revenues came in at $113.2 million, 16.5% ahead of the second quarter of 2013 and the Company realized Adjusted EBITDA of $6.2 million. The primary drivers of improving performance were Westeel, where revenue and EBITDA were up 50% and 80% respectively, our IMP business returning to double digit margins on continuing strong volume, and PTM volumes increasing significantly and margins returning to historical rates for the first time since it was acquired in 2013. These positives in the quarter were partially offset by increased steel costs and in the case of the Building Products division, a delayed start to the construction season in Canada.
The results in the quarter were encouraging given that both businesses absorbed $5.2 million in unrecovered steel costs, representing 4.6% of revenues. The Company implemented price increases to offset the increase in steel costs experienced but these price increases will not be fully realized in revenues until the third quarter as the Company works through committed backlogs.
| Three months ended
| Six months ended
|Vicwest Building Products||63.7||64.2||108.1||107.2|
|Vicwest Building Products||1.7||4.4||(2.7)||(0.2)|
Westeel's 50% revenue growth in the second quarter of 2014 reflected strong sales volume in grain storage products and a significant increase in PTM volumes. This revenue reflected the high backlog carried into the quarter. Demand continued to be strong through the quarter contributing to an order backlog at June 30, 2014 which was 157% higher than prior year.
Westeel's adjusted EBITDA for the second quarter increased 80% from $2.5 million in 2013 to $4.5 million in 2014, primarily as a result of increased agricultural sales volumes, offset by $3.9 million in increased steel costs.
Vicwest Building Products revenue in the second quarter decreased by 0.8% compared to the second quarter of 2013. This small decrease is attributed to the extended severe winter weather which delayed the start of construction season from April to May. Though overall sales volumes in the quarter were flat compared to 2013, the monthly trend was encouraging such that by the middle of the quarter sales volumes were exceeding prior year across all product lines. Backlog increased on a year-over-year basis by 19%.
Vicwest Building Products' adjusted EBITDA for the second quarter of 2014 decreased $2.7 million. The decrease was primarily a result of the slow start to the Canadian construction season and unrecovered steel cost increases of $1.3 million in the quarter. Price increases to cover the increase in input costs were announced in the first two quarters but with the delayed start of the construction season and the time lag between booking and shipping orders, these price increases will start improving margins in the third quarter.
The Board of Directors declared a third quarter dividend of $0.15 per share, payable on October 15, 2014 for shareholders of record on September 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 margin improvement strategies. The 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. Total net debt decreased marginally during the second quarter and, as expected, at June 30, 2014, the Company was well within the excess availability thresholds of the ABL.
Management is optimistic for the remainder of 2014 and longer term as they believe there are a number of fundamental trends which will drive demand for the Company's products including strong domestic and growing international demand for grain storage systems, increasing market acceptance of IMP and a non-residential construction sector that leading indicators suggest is nearing the end of a long downturn. Management is confident that these fundamentals will be supported by the Company's strong customer relationships, extensive distribution networks, well recognized and respected brands and efficient operations.
It is expected that for the second half of 2014 the Company will continue to benefit from: i) a significant increase in backlog at Westeel which, by the end of the second quarter, was 157% higher than prior year, ii) continued growth in North American IMP sales and backlog, which is up 57% over prior year and iii) continued recovery in IMP margins which have now returned to historical levels, iv) Westeel's continued expansion into international markets which is gaining increasing traction with the integration and rapid growth of PTM and v) continued focus on costs and efficiencies which, during the second quarter, has eliminated $4.2 million in annual SG&A and operating costs. These positive trends during the second quarter will be somewhat tempered by management's expectations that Canadian non-residential construction will remain weak through the remainder of 2014.
At Westeel, the Company expects margin improvements through the remainder of the year as the division has now substantially worked through its low-margin backlog from the fall 2013 North American booking programs. It has also successfully resolved the steel supply shortage that impacted its profitability through the first half of the year. Consequently, it is expected that the division will earn more normalized historic margins through the remainder of 2014. As mentioned, Westeel's current backlog of $61.7 million is 157% above prior year at quarter end. Management is encouraged by the fact that overall North American demand for grain storage products continues to be strong. Order intake through the first half of 2014 has continued at a pace more than 75% higher than prior year. Although it is expected that Canadian agricultural output will be lower this year due to some localized flooding that has occurred, the current crop estimates are still in line with 2012 crop production. As such, the Company expects continued healthy investment in storage due to the continued volatility in crop prices, the growing momentum in Canadian commercial storage investment and the growing momentum in overseas projects with Westeel and PTM combined having the highest level of quoting activity in their history. The Company is particularly pleased with the progress of PTM, which was a drag on earnings through the back half of 2013 and the first quarter of 2014 and is now on track for record sales and earnings in 2014 and has backlog in place carrying into 2015.
At Vicwest BP, the domestic institutional, commercial and industrial (ICI) construction starts were down 30% year-over-year to the end of the second quarter driven in large part by a very late start to the construction season. The overall financial impact of these lower volumes has been lessened by the division's plant optimization in 2013 and the overhead cost reductions made in 2014. The Company continues to focus on improving margins through price management, improving operating efficiencies and new value-added product introductions. Going forward, expectations continue to be for a modest improvement in the seasonal volume of domestic construction activity combined with continued growth in IMP sales. By the end of the second quarter, Vicwest BP had an IMP backlog that was 57% higher than prior year and recently announced price increases in both IMP and the conventional building products market were gaining traction which will lead to improving margins in Q3. In IMP in particular, our expectation is that margins will return to normalized levels through the second half of 2014.
Consistent with past years, as the Company works through continuing strong backlog levels and manages capital expenditure programs cautiously, it expects to reduce the outstanding ABL balance in meaningful ways through the third and fourth quarters.
Second Quarter Conference Call and Webcast
Vicwest Inc. will host its second quarter 2014 conference call and webcast on August 7, 2013 at 10:00 a.m. (ET). To participate in the teleconference, the numbers are 1-800-505-9573 or 1-416-204-9488. 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. The Company operates through two strategically aligned divisions: Vicwest Building Products and Westeel. With approximately 7,000 customers, 1,200 dedicated employees and 34 business partners, it 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.
The information included in this press release contains certain measures that do not have standardized meanings prescribed by IFRS are and therefore, unlikely to be comparable to similar measures presented by other entities.
"Adjusted EBITDA" represents EBITDA adjusted to exclude changes in the fair value of embedded derivatives, unrealized losses on forward contracts, other expense, restructuring and optimization costs, pension settlement/recovery costs and non-recurring income and expense items. The Company believes that in addition to net earnings or loss, Adjusted EBITDA is a useful supplemental measure of cash available for distribution prior to debt service, changes in working capital, capital expenditures and income taxes for the Company. It is believed that Adjusted EBITDA is useful to investors for the purpose of assessing the Company's performance and the presentation has been made to exclude items not considered representative of normal operations. Investors are cautioned that Adjusted EBITDA does not have a standardized meaning under IFRS and should not be construed as an alternative to net earnings or loss determined in accordance with IFRS. The Company's method of calculating Adjusted EBITDA may differ from the method used by other issuers and accordingly the Company's adjusted EBITDA calculation may not be comparable to similarly titled measures used by other issuers. A reconciliation of net income to Adjusted EBITDA is provided in the Company's publicly disclosed Management Discussion and Analysis.
"Backlog" means 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 monitored by management as an indicator of future sales volumes and backlog is used to forecast production levels for the Company. It is believed that backlog is a useful metric for investors to forecast future revenue levels for the Company. Investors are cautioned that backlog provides no assurance about the timing of when that recorded revenue will be recognized. Investors are cautioned that backlog does not have a standardized meaning under IFRS and as a result the Company's method of calculating backlog may differ from the method used by other issuers and accordingly the Company's backlog calculation may not be comparable to similarly titled measures used by other issuers. Backlog does not have any equivalent financial measures and therefore cannot be reconciled to measures defined by IFRS.
"Net income attributable to shareholders excluding change in fair value of embedded derivatives, unrealized loss on forward contracts and other expense" is an additional supplemental measure that the Company's management uses as it better reflects the operational results of the Company and is used for the purposes of assessment and measurement of earnings per share. However, net income excluding change in fair value of embedded derivatives, unrealized loss on forward contracts and other expense is not a recognized measure under IFRS. It is believed that net income excluding change in fair value of embedded derivatives, unrealized loss on forward contracts and other expense is a useful measure to investors for the purpose of assessing the Company's performance and the presentation has been made to exclude items not considered representative of normal operations. Investors are cautioned that net income excluding change in fair value of embedded derivatives, unrealized loss on forward contracts and other expense should not be construed as an alternative to net earnings or loss determined in accordance with IFRS or as an indicator of the Company's performance as an alternative to cash flows from operating, investing and financing activities which measure the Company's liquidity and cash flows. The Company's method of calculating net income excluding change in fair value of embedded derivatives, unrealized loss on forward contracts and other expense may differ from the method used by other issuers and, accordingly, the Company's calculation may not be comparable to similarly titled measures used by other issuers. A reconciliation from net income attributable to shareholders to net income attributable to shareholders excluding change in fair value of embedded derivatives, unrealized loss on forward contracts and other expense is provided in the Company's publicly disclosed Management Discussion and Analysis.
1 See disclosure on non-IFRS measures detailed at the end of this press release. Refer to "Non-IFRS measures" for more details around these measures as provided in the Company's publicly disclosed Management Discussion and Analysis (MD&A). The MD&A and all required disclosure and reconciliations for these non-IFRS measures can be found on http://www.vicwestinc.com/pages/financial-reports-public-findings.
SOURCE: Vicwest Inc.
For further information:
President & Chief Executive Officer
Tel: (905) 469-5700
Chief Financial Officer
Tel: (905) 469-5706