COEUR D'ALENE, ID, March 23, 2012 /CNW/ - WGI Heavy Minerals, Incorporated ("WGI") (TSX: WG) today reported net earnings for the year ending December 31, 2011 of $0.013 per share ($0.30 million) compared to earnings of $0.042 per share ($0.99 million) for 2010.
The Company continued to experience year-over-year revenue growth achieving $37.82 million in revenues for the year; an increase of 11.2% over 2010. Revenues for the Abrasives segment improved 11.6% year-over-year closing the year out at $32.77 million for 2011. The Waterjet Parts segment revenues increased 8.8% over 2010 to $5.05 million reflecting increased sales in Eastern Europe and the Middle East.
Downward pressure on sales prices due to increased competition and garnet supply resulted in the Company experiencing a 3% decline in its overall gross margin, as anticipated at the beginning of the year. Consequently, earnings from operations declined to $0.83 million compared to $1.36 million in 2010. In addition to the price erosion of garnet, higher Sales, General and Administrative ("SG&A") expenses contributed to the decline.
During the year the Company incurred $0.57 million in non-recurring charges related to the restructuring of its European subsidiary, Kominex. In order to functionally align and streamline the Company's efforts in Europe the resident Managing Director for Kominex was removed. The Company incurred professional fees, severance costs, and costs related to staff turnover during this restructuring. The Company has hired an experienced General Manager and new sales and administrative personnel. This restructuring has improved worker safety and environmental stewardship. The European operations have also been strengthened by installing and commencing the implementation of a fully integrated Electronic Data Processing ("EDP") system, and the acquisition of a new warehouse.
Revenues for the fourth quarter were $8.05 million, down 6.5% year-over-year compared to the fourth quarter of 2010. The main contributing factor for the decrease was a decision by one of our Kominex customers of our other abrasive products line to launch its own recycling business and facilities. As a consequence this customer stopped purchasing these products and services from Kominex in the fourth quarter and hired away several Kominex employees to this new venture. This temporary disruption accounted for the entire revenue decline in the fourth quarter. In addition to the lost sales, the Company incurred additional costs associated with the Kominex restructuring of $0.25 million in the fourth quarter. As a result of our restructuring, we anticipate replacing lost sales over the next year in addition to profitably growing our garnet and waterjet business in Europe.
The Company recorded a net loss of $0.25 million for the quarter ending December 31, 2011 or ($0.011) per share compared to net earnings of $0.33 million or $0.014 earnings per share in the same quarter of 2010.
"2011 was a challenging year for the Company as we realigned our management and sales team in Europe," said Greg Emerson, President & CEO. "We are now positioned to regain the business lost during the restructuring and steer the Company to higher revenue and profit targets in 2012. We are reinvesting in our operations both here in North America and Europe. Improvements in production flows will reduce operating costs and improve on margins as will investment in capital equipment to return to in house manufacturing at IWP."
The Company continues to add new business, albeit at a slower pace than in the past. At the same time we are seeing new competition from former customers, increased competition in our European markets and continued competitive rivalries in North America. Competitive pressure from ongoing product oversupply in garnet markets and the pursuit of market share among competitors has created a drag on pricing. We are starting to see a notable increase in demand as well as a tightening in supply due to production constraints among the Indian garnet suppliers.
Garnet and waterjet abrasives business in 2012 is expected to grow through new customer additions and increased volumes. In addition the Company expects to see gains from improving markets and new product offerings. Increasing garnet costs, logistics and fuel price volatility, along with pricing competition, are expected to continue to keep pressure on margins through 2012.
The Company's subsidiary, International Waterjet Parts, will be active in expanding our Waterjet parts offering to keep current with evolving Original Equipment Manufacturer designs. The Company plans to bring some manufacturing back in-house from its US vendors, which is expected to bring parts costs down and improve operating margins, allowing the Company to improve profitability.
The Company will continue its efforts to offer both Abrasives and Waterjet parts to customers of either segment, thereby increasing our value to the customer. In addition, the Company looks to expand its global reach by strengthening its sales and marketing department through the addition of experienced personnel.
WGI continues to focus on operational improvements across all divisions, in addition to the identification of new resources through expanded mineral exploration. The Company will look to partner or invest with other companies to develop their new mineral deposits and will continue to investigate larger regional garnet/ilmenite deposits where the Company can use its mining and distribution expertise to bring new multi mineral resources into operation.
Selected Financial Information
The selected annual information of operating results and financial position should be read in conjunction with the Audited Financial Statements of the Company for the year ended December 31, 2011, as well as the accompanying notes, which are reported in U.S. dollars and have been prepared in accordance with IFRS.
|Extracted from Audited Financial Statements||Dec. 31, 2011||Dec. 31, 2010|
|(in thousands other than earnings per share)||$ 000's||$ 000's|
|Earnings from operations before non-recurring items and income taxes||832||1,355|
|Earnings for the year||297||985|
|Basic/fully diluted earnings per share||0.013/0.012||0.042/0.040|
|EBITDA before restructuring charge||1,632||2,081|
|Net cash flow (including marketable securities)||(429)||(1,228)|
|As at||As at|
|Dec. 31, 2011||Dec. 31, 2010|
|$ 000's||$ 000's|
|Cash, cash equivalents, securities and short term investments||5,741||6,170|
|Long-term financial liabilities and current portion of long-term debt||383||597|
The principal business of WGI Heavy Minerals, Incorporated is the processing and sale of industrial abrasive minerals and the sourcing, assembly and sale of ultra-high pressure waterjet cutting machine replacement parts and components. The Company, through its subsidiaries, markets and sells abrasive products and services and waterjet replacement parts globally.
This news release contains forward-looking statements concerning the business, operations, and financial performance and condition of WGI Heavy Minerals, Incorporated. A number of the matters discussed and statements made in the press release contain forward-looking statements reflecting current expectations regarding future assets. When used in this press release, the words "believe", "anticipate", "intend", "estimate", "expect", "project", and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. These forward-looking statements are based on current expectations and are naturally subject to risks, uncertainties, and changes in circumstances beyond management's control that may cause actual results to differ materially from those expressed or implied by such forward-looking statements. Factors that may cause such differences include but are not limited to: exploration and development risks; risks related to permits and title to property; risks related to foreign countries and regulatory requirements; operating hazards; foreign currency fluctuations; competition; fluctuations in the market price of mineral commodities and transportation costs; uncertainty as to calculations of mineral deposit estimates; uninsured risks; and dependence upon key management personnel and executives. Actual results may differ materially from those expressed here. You should not place undue reliance on such forward-looking statements. The Company is under no obligation to update or alter such forward-looking statements, whether as a result of new information, future events, or otherwise.
Expressed in U.S. dollars unless otherwise stated.
For further information:
Greg Emerson, Ed Kok
810 Sherman Ave., Coeur d'Alene, ID 83814 U.S.A.
(208) 666-6000 Fax (208) 666-4000 www.wgiheavyminerals.com
Greg Emerson, President & CEO
(208) 770-2202 E-mail [email protected]
Ed Kok, Executive Vice-President, Investor Relations
(208) 770-2208 E-mail [email protected]