ZCL Composites Reports Q Financial Results

Transcription

1 ZCL Composites Reports Q Financial Results Edmonton, Alberta, August 3, 2017 ZCL Composites Inc. (TSX: ZCL) today announced financial results for the second quarter ended June 30, Q compared with Q (Continuing Operations) Revenue of $53.3 million, up $8.6 million or 19% from $44.7 million; Gross profit of $11.9 million (22% of revenue), up $2.4 million or 25% from $9.5 million (21% of revenue); Net income of $6.0 million or $0.19 per share (fully diluted), up $1.6 million or 37% from $4.4 million or $0.14 per share (fully diluted); and Adjusted EBITDA of $9.5 million (18% of revenue), up $2.1 million or 28% from $7.4 million (17% of revenue). First Half 2017 compared with First Half 2016 (Continuing Operations) Revenue of $85.0 million, up $5.4 million or 7% from $79.6 million; Gross profit of $18.0 million (21% of revenue), up $0.8 million or 5% from $17.2 million (22% of revenue); Net income of $6.9 million or $0.22 per fully diluted share, up $0.4 million or 6% from $6.5 million or $0.21 per fully diluted share; and Adjusted EBITDA of $12.6 million (15% of revenue), up $1.2 million or 11% from $11.4 million (14% of revenue). ZCL had a very strong second quarter in both revenue and profitability, said Ron Bachmeier, President and Chief Executive Officer. We have fully made up for the weather impacted slow first quarter, and saw activity pick up further, bringing us to 7% revenue growth when compared to the first half of While our backlog is down slightly, our outlook remains positive and we expect to continue our profitable revenue growth in the second half of the year, said Mr. Bachmeier. Dividends The Board has declared a quarterly dividend of $0.12 per share, the same rate as the prior quarter and a 50% increase over the $0.08 declared at the same time last year. The dividend will be paid on October 16, 2017, to the shareholders of record as of September 30, Backlog Backlog was $51.5 million as at June 30, 2017, down $3.6 million or 6%, from $55.0 million a year earlier. We believe the reduction is not an indicator of activity for the rest of the year and remain confident in continuing to grow revenue in the second half of the year. Fuel Markets backlog of $45.6 million was $2.4 million or 5% lower compared to the second quarter of Although North American Fuel Markets backlog was down, this was partially offset by International Fuel Market backlog which was up $1.1 million compared to the same quarter in

2 Water & Wastewater Markets backlog of $4.8 million, was down $0.4 million compared to the quarter ended June 30, 2016 with the decrease attributable to US markets. Canadian Water & Wastewater Markets were comparable to the same quarter in Oil & Gas/Industrial Market backlog of $1.1 million was down $0.8 million from a year earlier. A $0.3 million increase in Oil & Gas backlog was more than offset by a decrease in US Industrial Market backlog. The total backlog increased by $0.6 million from $50.8 million at March 31, A $2.7 million increase in Fuel Markets backlog was partially offset by a decrease in Oil & Gas/Industrial backlog. Water & Wastewater Markets were comparable to a quarter earlier. Financial Position Our balance sheet remained strong, with working capital of $53.6 million and a cash and cash equivalents balance of $19.7 million. The strength of our balance sheet allows us to maintain flexibility and preserve our ability to take advantage of future profitable growth opportunities that may arise Outlook On a half year basis, our 2017 revenues are up 7% over the same period of On balance, we expect continued growth in However, we caution that if the strengthening trend of the Canadian dollar against the US dollar in July 2017 continues, it might partially offset anticipated growth in revenue due to the translation of our US operations revenue to Canadian dollars for reporting purposes. Our outlook for the remainder of 2017 in the Fuel Markets remains positive and we are confident in achieving our growth objectives for this market. Among other indications, this expectation is based on feedback from our customers across North America. In early 2017, with the objective to focus on our emerging Water & Wastewater Markets, we launched a number of initiatives aimed at improving the effectiveness of our go to market strategy and increasing our market share. This included the restructuring of the Water & Wastewater sales group, culminating with the addition in early July of a seasoned executive to lead this team. We believe that this greater level of focus, combined with current market intelligence indicating that spending on Water & Wastewater related projects is again on the rise, will enable us to meet our future growth objectives in these markets. The Oil and Gas and Industrial Markets, which comprise of approximately 5% to 10% of our total revenues, continue to lag in the face of reduced spending in the Oil Sands of Western Canada. 2

3 Summary Financial Results For the three months ended (in thousands of dollars, June 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 except per share amounts) $ $ $ $ $ $ $ $ Revenue by Market: Fuel 42,975 26,913 39,030 49,664 34,978 29,118 34,501 46,278 Water & Wastewater 6,688 4,202 6,433 5,902 6,213 4,398 6,758 6,794 Oil & Gas/Industrial 3, ,139 2,319 3,528 1,400 3,139 2,564 Total revenue 53,306 31,741 46,602 57,885 44,719 34,916 44,398 55,636 Net income Continuing operations 6, ,749 7,741 4,396 2,132 4,774 7,896 Discontinued operations (note 1) (374) (37) 146 (1,249) (2,842) (1,094) (889) (2,691) Total net income 5, ,895 6,492 1,554 1,038 3,885 5,205 Adjusted EBITDA (note 2) 9,467 3,172 9,418 12,125 7,387 4,048 7,062 12,172 Basic and diluted earnings per share Continuing operations Total Adjusted EBITDA per diluted share (note 2) Dividends declared per share Note 1: The discontinued operations are the ZCL Dualam operations which were exited in the third quarter of 2016, due to continued and expected future operating losses. Note 2: Adjusted EBITDA and adjusted EBITDA per diluted share are non IFRS measures and are defined later in this MD&A under "Non IFRS M " The Company s management s discussion and analysis ( MD&A ) and unaudited interim condensed consolidated financial statements for the second quarter ended June 30, 2017, are available on SEDAR at and the ZCL website at this link: relations/financials.html. Conference Call ZCL Composites Inc. has scheduled an investor conference call for 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) on Friday, August 4, 2017, to discuss its financial and operating results for the second quarter ended June 30, To access the conference call by telephone, please call (647) from the greater Toronto area, or dial toll free from elsewhere in North America. An audio webcast may be accessed through the Investor Events tab on the ZCL website at relations/investor events.html. Audio replays will be available on the ZCL website 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 Non IFRS Measures: ZCL uses both IFRS and non IFRS measures to make strategic decisions and to set targets and believes that these non IFRS measures are useful for providing securities analysts, investors, and other interested parties with additional information to assist them in understanding components of our financial results. This includes a more complete understanding of factors and trends affecting our operating performance. Adjusted EBITDA, adjusted EBITDA per diluted share and working capital are non IFRS measures that are used by ZCL and may not be comparable to similar measures used by other companies. 3

4 Adjusted EBITDA and adjusted EBITDA per diluted share Adjusted EBITDA is defined as income from continuing operations before finance expense, income taxes, sharebased compensation, depreciation of property, plant and equipment, amortization of intangible assets, gains or losses on sale of assets, and impairment of assets. Adjusted EBITDA per diluted share is defined as adjusted EBITDA divided by weighted average diluted shares outstanding. Working Capital Working capital is defined as current assets less current liabilities. About ZCL Composites Inc. Our mission is to deliver Peace of Mind through corrosion resistant solutions that preserve and protect the environment. More information about ZCL is available on our website at 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 Fuels, Water and Wastewater, Oil and Gas, and Industrial markets, efforts to reduce administrative and production costs, manage production levels, anticipated capital expenditure trends, activity in the Fuels 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, forecast 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 Fuel, Water and Wastewater, Oil and Gas, and Industrial 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 Unless otherwise indicated, the consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and the reporting currency is in Canadian dollars. 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 also have the potential to impact the Company s revenues and earnings. 4

5 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 press release. 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. For further information, please contact: Ron Bachmeier Kathy Demuth President & CEO Chief Financial Officer ZCL Composites Inc. ZCL Composites Inc. (780) (780) Ron. Bachmeier@zcl.com Kathy.Demuth@zcl.com 5