EDMONTON, Nov. 7, 2013 /CNW/ - ZCL Composites Inc. (TSX: ZCL) today announced financial results for the third quarter and nine months ended September 30, 2013.
Q3 2013 compared with Q3 2012
- Revenue of $43.9 million, down $6.1 million or 12% from $50.1 million;
- Net income of $5.0 million, compared to $4.8 million;
- Earnings per share (fully diluted) of $0.17, compared to $0.16 per share (fully diluted);
- Record EBITDA of $8.5 million (19% of revenue), up $0.6 million or 8% from $7.9 million (16% of revenue); and
- Backlog of $37.3 million, down $10.2 million or 22% from $47.5 million.
First Nine Months 2013 compared with First Nine Months 2012
- Revenue of $124.0 million, down $1.5 million or 1% from $125.5 million; and
- Net income of $12.6 million or $0.43 per share (fully diluted), up $2.0 million or 19% from net income of $10.6 million or $0.37 per share (fully diluted). Net income in 2012 included a positive impact of $1.4 million of $0.05 per share, relating to the redemption of the preferred shares and related transactions.
"We are pleased to report another solid quarter for ZCL and even though revenue was down compared to the third quarter of 2012, continued momentum in operating performance resulted in gross margins reaching 24% of sales as well as record EBITDA and EBITDA as a percentage of revenue," said Ron Bachmeier, President and Chief Executive Officer. "Strong performance in the Petroleum and Water Products groups was partially offset by softness in the Corrosion Products group."
"We have been successful in executing our strategic plan and as a result have established a stable platform on which to grow our business," said Mr. Bachmeier. "We recognize that as we maintain a strong focus on improving operational efficiency and increasing profitability, we must expand our efforts to grow our company across all of our product groups. In order to accelerate the growth in our Corrosion Products group, we are expanding our sales team. We have recently hired a senior business development executive with broad sales and marketing experience in the Western Canada energy, Oil Sands, and industrial markets. We expect that this expanded focus will enable us to not only improve our responsiveness to current customers, but also open doors to new customers who have a need for ZCL products and services," said Mr. Bachmeier.
Revenue for the third quarter ended September 30, 2013 was $43.9 million, down $6.1 million or 12% from $50.1 million in the third quarter of 2012. Lower revenue in the Aboveground segment more than offset revenue increases in the Underground operating segment.
Gross profit for the third quarter ended September 30, 2013 was $10.5 million, up $0.6 million or 9% from $9.9 million a year earlier. Gross margin increased to 24% of revenue for the third quarter of 2013, up from 20% for the same quarter a year earlier, with the increase attributed to process improvements in operations, changes in customer mix, and in the Underground group, production efficiencies as a result of increased sales volume.
Net income for the third quarter ended September 30, 2013 was $5.0 million, compared to $4.8 million a year earlier. Earnings per share for the third quarter of 2013 was $0.17 (fully diluted), compared to $0.16 (fully diluted) a year earlier.
As of September 30, 2013, backlog was $37.3 million, down $10.2 million or 22% from $47.5 million a year earlier. As the Underground backlog is up from the prior year, the decrease resulted from a decline in the Aboveground backlog. The Aboveground backlog decline reflects slower new order activity in all market segments, including Oil Sands, industrial chemicals and power generation.
At September 30, 2013, ZCL's balance sheet had working capital (current assets less current liabilities) of $44.8 million, up $13.1 million or 41% from $31.7 million at December 31, 2012. As at September 30, 2013, ZCL's net cash totalled $3.7 million, up $3.6 million from a net cash position of $0.1 million as at December 31, 2012. Management expects the net cash/net debt position to continue to fluctuate due to the inherent seasonality and timing of working capital requirements of the business.
The Board has declared a quarterly dividend of $0.03 per share for the third quarter of 2013. The dividend will be paid on January 15, 2014, to the shareholders of record as of December 31, 2013.
Outlook and Priorities
For the balance of 2013 and beyond, our strategic priorities will continue to be focused on improving profitability and maintaining a strong and flexible balance sheet while expanding our pursuit of growth opportunities. While our short term outlook indicates expected reduced revenues in the Corrosion products group, we believe this remains our largest potential for growth over the long term. With strong backlog in Underground, we anticipate a continued trend of moderate revenue growth in the Petroleum and Water Products groups. We are seeing a pickup in momentum for replacing an aging base of underground fuel storage tanks and continued recovery in construction markets throughout North America, particularly in the US.
We remain committed to the five key aspects of ZCL's 2013 strategic plan
- Focus on quality
- Improve profitability
- Meet deliveries and reduce lead times
- Expand employee integration
- Continued focus on safety
Our operations group continues to work on lean initiatives to eliminate non-value added activities from our production processes and react quickly to fluctuating product demand in our facilities. Our success is evident in ZCL's significant and continuing margin improvements. Even though the relative pace of improvement might slow and margins stabilize over the coming quarters, there remain future opportunities for continuous improvements in our plant operations. In 2012, we established an internal goal of improving gross margins by two percentage points each year over a three year period, or by a cumulative six percentage points over a three year period, which we termed internally the "2-2-2 Program". By the end of 2013, only two years into the three year program, we expect to have substantially achieved that margin improvement goal.
Summary Financial Results
|For the three months ended||2013||2012||2011|
|(in thousands of dollars,||Sep 30||Jun 30||Mar 31||Dec 31||Sep 30||Jun 30||Mar 31||Dec 31|
|except per share amounts)||$||$||$||$||$||$||$||$|
|Basic earnings per share||0.17||0.17||0.09||0.10||0.17||0.15||0.06||0.06|
|Diluted earnings per share||0.17||0.17||0.09||0.10||0.16||0.15||0.06||0.06|
|Dividends declared per share||0.03||0.025||0.025||0.02||0.015||0.01||0.01||-|
MD&A and Financial Statements
The Company's management's discussion and analysis ("MD&A") and unaudited interim condensed consolidated financial statements for the third quarter ended September 30, 2013 and 2012, are available on Sedar at www.sedar.com and the ZCL Web site at this link: http://www.zcl.com/investor-relations/financials.html.
ZCL Composites Inc. has scheduled an investor conference call for 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) on Friday November 8, 2013, to discuss its financial and operating results for the third quarter ended September 30, 2013.
To access the conference call by telephone, please call 647-427-7450 from the greater Toronto area, or dial toll free 888-231-8191 from elsewhere in North America. An audio webcast may be accessed through the Investor Events tab on the ZCL Web site at http://www.zcl.com/investor-relations/investor-events.html. Audio replays will be available on the ZCL Web site shortly after the conclusion of the conference call.
The conference call will include prepared remarks by ZCL's President and Chief Executive Officer, Ron Bachmeier and by ZCL's Chief Financial Officer, Kathy Demuth. After the prepared remarks, ZCL will accept questions from analysts and institutional investors. The public is invited to listen to the conference call in real time or by replay.
Note on Backlog
Backlog is defined as the total value of orders that management has assessed as having a high certainty of being performed because of the existence of a contract or purchase order specifying the scope, value and timing of an order.
Note on EBITDA
EBITDA is defined as income from operations before finance expense, income taxes, share-based compensation, depreciation of property, plant and equipment, amortization of intangible assets, gains or losses on sale of assets, and impairment of assets.
Advisory Regarding Forward-Looking Statements
This document contains forward-looking statements under the heading "Outlook" and elsewhere concerning future events or the Company's future performance, including the Company's objectives or expectations for revenue and earnings growth, income taxes as a percentage of pre-tax income, business opportunities in the Petroleum Products, Water Products, Corrosion Products markets, efforts to reduce administrative and production costs, manage production levels, anticipated capital expenditure trends, activity in the petroleum and other industries and markets served by the Company and the sufficiency of cash flows and credit facilities available to cover normal operating and capital expenditures. Forward-looking statements are often, but not always, identified by the use of words such as "seek," "anticipate," "plan," "continue," "estimate," "expect," "may," "will," "project," "predict," "potential," "targeting," "intend," "could," "might," "should," "believe" and similar expressions. Actual events or results may differ materially from those reflected in the Company's forward-looking statements due to a number of known and unknown risks, uncertainties and other factors affecting the Company's business and the industries the Company serves generally.
These factors include, but are not limited to, fluctuations in the level of capital expenditures in the Petroleum Products, Water Products, and Corrosion Products markets, drilling activity and oil and natural gas prices, and other factors that affect demand for the Company's products and services, industry competition, the need to effectively integrate acquired businesses, uncertainties as to the Company's ability to implement its business strategy effectively, political and economic conditions, the Company's ability to attract and retain key personnel, raw material and labour costs, fluctuations in the US dollar, euro and Canadian dollar exchange rates, and other risks and uncertainties described under the heading "Risk Factors" in the Company's most recent Annual Information Form, and elsewhere in this document and other documents filed with Canadian provincial securities authorities. These documents are available to the public at www.sedar.com.
In addition to the factors noted above, management cautions readers that the current economic environment could have a negative impact on the markets in which the Company operates and on the Company's ability to achieve its financial targets. Factors such as continuing global economic uncertainty, tighter lending standards, volatile capital markets, fluctuating commodity prices, and other factors could negatively impact the demand for the Company's products and the Company's ability to grow or sustain revenues and earnings. Fluctuations in conversion rates of the US dollar to Canadian dollar and euro to Canadian dollar have the potential to impact the Company's revenues and earnings.
The Company believes that the expectations reflected in the forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this report should not be unduly relied upon.
The forward-looking statements in this report speak only as of the date of this report. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by the Company or on the Company's behalf, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.
SOURCE: ZCL Composites Inc.
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President & CEO
ZCL Composites Inc.
Chief Financial Officer
ZCL Composites Inc.