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KHD Humboldt Wedag International Ltd. Reports 2009 Third Quarter and Nine-Month Results
- New order intake of $113.0 million in the third quarter -
NEW YORK, Nov. 16 /PRNewswire-FirstCall/ -- KHD Humboldt Wedag International Ltd. (NYSE: KHD) today announced results for the third quarter and nine months ended September 30, 2009. All dollar figures are in U.S. dollars.
For the three months ended September 30, 2009, KHD reported revenues of $148.2 million with a net income of $7.5 million, or $ 0.25 per share on a diluted basis, which included restructuring charges. This compares to revenues in the third quarter of 2008 of $193.6 million and net income for that period of $30.8 million, or $1.01 per share on a diluted basis. Our margins, excluding special charges, for the third quarter of 2009 were 17 percent as compared to 19 percent in the third quarter of 2008.
For the nine months ended September 30, 2009, KHD reported revenues of $366.2 million with a net income of $1.2 million, or $0.04 per share on a diluted basis. This compares to revenues in the first nine months of 2008 of $474.7 million and net income for that period of $57.9 million, or $1.89 per share on a diluted basis. Our margins were 19 percent for both the first nine months of 2009 and 2008.
KHD's balance sheet remains strong. As of September 30, 2009, our cash and cash equivalents increased to $407.4 million (as compared to $356.8 at the end of the second quarter); working capital was $312.2 million; and shareholders' equity was $279.8 million (as compared to $257.9 million at the end of the second quarter). KHD's current ratio was 1.79 and its long-term debt-to-equity ratio was 0.04.
CEO Jouni Salo commented, "We are pleased to report that the third quarter showed signs of improvement both in order intake and in operating income as compared to the second quarter. The sale of the coal and minerals customer group and the Cologne workshop in early October allows us to focus on our core competencies and significantly reduces the fixed-cost base of our business. In connection with the sale, we retained the rights to our proprietary roller press technologies and capabilities which are an important part of our service business. This is a significant step in moving towards becoming a customer-focused service company providing environmentally friendly technologies.
"It has also been a year since we began to see the impact of the dramatic slowdown in our main cement market and started to develop our restructuring plans. We are making good progress with the implementation of our new operating structure and now have a clear direction for KHD to create a business that is sustainable over the longer term."
For comparative purposes, all of the following amounts for order intake and backlog were translated directly from Euros to US dollars at 1.46, the exchange rate prevailing on September 30, 2009.
Order intake is defined as the total value of all orders received during the respective period, while order backlog is defined as the value of orders received but not yet fulfilled.
Order intake for the quarter ended September 30, 2009, was $113.0 million, an increase of 39 percent from 2008. Of this total, 31 percent came from Russia and Eastern Europe, 25 percent came from Asia, 18 percent came from the Middle East, 15 percent came from Europe and 11 percent came from Africa. Of the third quarter 2009 order intake, $76.8 million came from cement and $36.2 million from coal and minerals.
CEO Jouni Salo continued, "We are also pleased to note that cement order intake was more than three times the level of the second quarter of 2009 and 19 percent higher than the cement order intake in the third quarter of 2008."
Order backlog as of September 30, 2009 was $626.3 million, a decrease of 41 percent from September 30, 2008. Of this, $542.7 million is associated with cement projects, which will primarily comprise our order backlog going forward.
CFO Alan Hartslief added, "At December 31, 2008, we classified $159.2 million of the contracts in our order backlog as 'at risk'. During the third quarter of 2009, after critical analysis of these contracts and continued negotiations with the respective customers we determined that contracts aggregating $95.8 million would not be proceeding and such contracts were removed from our order backlog at September 30, 2009. The remainder of contracts previously identified as at risk are now considered to be normal contracts and remain in our order backlog.
"In addition, as a result of the divestment of our Cologne workshop, we now expect that our previously estimated restructuring costs of $30.0 million will be reduced by approximately $18.0 million for this phase of restructuring. While this is presently the only phase of the restructuring program that is contemplated, future market conditions may necessitate our undertaking additional restructuring initiatives."
Mr. Salo concluded, "There are some indications that we may expect to see some gradual improvement in market conditions. Furthermore, we have not seen any significant new project cancellations. Our customers remain cautious on capital expenditure plans, but in general we have seen some improvement in confidence over the past few months. However, this does not mean that we believe that we will return to the extremely buoyant market conditions of recent periods in the short to medium term.
"We continue to see good levels of enquiries from emerging regions such as India, North Africa and the Middle East. While we remain cautiously optimistic about market recovery and we believe that order intake is the best measure of this, we remain realistic in our expectations that 2010 and 2011 will continue to be difficult years for sales volumes. Since the fourth quarter of 2008, KHD's focus has been, and remains, on preserving cash and positioning the company to capitalize on a recovery.
"Our restructuring programs are progressing well. We have a significant net cash position and this means we have the financial strength to complete our restructuring plans and take advantage of any opportunities that may emerge as global economies recover. We also intend to invest in developing technology to differentiate ourselves from our competitors.
"This has been a very difficult year for our shareholders, our employees and our customers. Initially the changed environment was unsettling. However, with a solid plan in place and measurable progress on its implementation, we are working to meet the challenges of enhancing shareholder value through helping our customers produce cement and process minerals in a much more energy efficient and environmentally friendly manner."
Shareholders are encouraged to read the entire Form 6-K, which has been filed with the SEC, for a greater understanding of KHD. The Form 6-K is also available on the Company's website.
Today at 10:00 a.m. EST (7:00 a.m. PST), a conference call will be held to review the Company's results. This call, with a powerpoint presentation prepared for the call, will be broadcast live over the Internet at www.khdhumboldt.com or www.earnings.com. For those wishing to access the presentation, we suggest logging in a bit early to be safe. An online archive will be available immediately following the call and will continue for seven days or to listen to the audio replay by phone, dial: 1 (888) 286 8010 using conference ID number: 43188967. International callers should dial: 1 (617) 801 6888.
About KHD Humboldt Wedag International Ltd.
KHD Humboldt Wedag International Ltd. owns companies that operate internationally in the industrial plant engineering and equipment supply industry, and specializes in the cement and mineral processing industries. To obtain further information on the Company, please visit our website at http://www.khdhumboldt.com
Disclaimer for Forward-Looking Information
Certain statements in this release are forward-looking statements, which reflect the expectations of management regarding the Company's future growth, results of operations, performance and business prospects and opportunities. The worldwide macroeconomic downturn has resulted in the prolonging or cancellation of some of some of our customers' projects and may negatively affect our customers' ability to make timely payment to us. Further, it may result in a further decrease in the demand for our products or services. Any of these may have a material adverse effect on our operating results and financial condition. Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations or intentions regarding the future. No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits the Company will obtain from them. These forward-looking statements reflect management's current views and are based on certain assumptions. These assumptions, which include management's current expectations, estimates and assumptions about certain projects and the markets the Company operates in, the global economic environment, interest rates, exchange rates and our ability to attract and retain customers and to manage our assets and operating costs, may prove to be incorrect. A number of risks and uncertainties could cause our actual results to differ materially from those expressed or implied by the forward-looking statements, including: (1) a continued downturn in general economic conditions in Asia, Europe, Russia, Eastern Europe, the Middle East, the United States and internationally including, the continued worldwide economic downturn resulting from the effects of the sub-prime lending and general credit market crises, volatile energy costs, decreased consumer confidence and other factors, (2)continuing decreased demand for our products, including the renegotiation, delay and/or cancellation of projects by our customers and the reduction in the number of project opportunities, (3) a decrease in the demand for cement, minerals and related products, (4) the number of competitors with competitively priced products and services, (5) product development or other initiatives by our competitors, (6) shifts in industry capacity, (7) fluctuations in foreign exchange and interest rates, (8) fluctuations in availability and cost of raw materials or energy, (9) delays in the start of projects included in our forecasts, (10) delays in the implementation of projects included in our forecasts and disputes regarding the performance of our services, (11) the uncertainty of government regulation and politics in Asia and the Middle East and other markets, (12) potential negative financial impact from regulatory investigations, claims, lawsuits and other legal proceedings and challenges, (13) the timing and extent of our restructuring program and the restructuring charges to be incurred in connection therewith, and (14) other factors beyond our control. Additional information about these and other assumptions, risks and uncertainties are set out in the "Risk Factors" section in our Form 6-K filed with the Securities and Exchange Commission and the "Risks and Uncertainties" section in our MD&A filed with Canadian security regulators.
Contact Information: Allen & Caron Inc. Rene Randall
Joseph Allen (investors) KHD Humboldt Wedag
1 (212) 691-8087 International Ltd.
joe@allencaron.com 1 (604) 683-8286 ex 224
or rene.randall@khd.com
Brian Kennedy (media)
1 (212) 691-8087
brian@allencaron.com
- UNAUDITED INTERIM FINANCIAL TABLES FOLLOW -
KHD HUMBOLDT WEDAG INTERNATIONAL LTD.
CONSOLIDATED BALANCE SHEETS
September 30, 2009 and December 31, 2008
(Unaudited)
(U.S. Dollars in Thousands)
ASSETS 2009 2008
---- ----
Current Assets
Cash and cash equivalents $407,423 $409,087
Securities 6,034 2,987
Restricted cash 27,135 32,008
Accounts receivable, trade 77,904 62,760
Other receivables 22,864 28,313
Inventories 78,112 110,161
Contract deposits, prepaid and other 55,610 58,694
Future income tax assets 6,238 7,679
Assets held for sale 26,600 -
------ ---
707,920 711,689
Non-current Assets
Notes receivables 12,214 -
Property, plant and equipment 1,738 2,489
Interest in resource property 26,975 24,861
Equity method investments 43 325
Future income tax assets 14,099 6,339
Investment in preferred shares of former
subsidiaries - 19,125
Other non-current assets 872 830
Assets held for sale 302 -
--- ---
56,243 53,969
------ ------
$764,163 $765,658
======== ========
KHD HUMBOLDT WEDAG INTERNATIONAL LTD.
CONSOLIDATED BALANCE SHEETS (cont'd)
September 30, 2009 and December 31, 2008
(Unaudited)
(U.S. Dollars in Thousands)
LIABILITIES 2009 2008
---- ----
Current Liabilities
Accounts payable and accrued expenses $138,484 $178,582
Progress billing above costs and estimated
earnings on uncompleted contracts 148,964 171,843
Advance payments received from customers 13,033 11,331
Income tax liabilities 8,671 9,112
Deferred credit, future income tax assets 2,676 4,212
Accrued pension liabilities, current portion 2,119 2,158
Provision for warranty costs, current portion 27,294 30,856
Provision for restructuring costs 10,404 -
Provision for supplier commitments on
terminated customer contracts 22,546 23,729
Liabilities related to assets held for sale 21,574 -
------ ---
395,765 431,823
Long-term Liabilities
Long-term debt, less current portion 11,891 11,313
Accrued pension liabilities, less current
portion 29,652 29,209
Provision for warranty costs, less current
portion 16,208 7,524
Deferred credit, future income tax assets 4,389 4,176
Future income tax liability 12,092 7,646
Other long-term liabilities 6,809 8,344
Liabilities related to assets held for sale 2,404 -
----- ---
83,445 68,212
------ ------
Total liabilities 479,210 500,035
MINORITY INTERESTS 5,177 3,709
SHAREHOLDERS' EQUITY
Common stock, without par value 143,826 143,826
Treasury stock (96,157) (93,793)
Contributed surplus 7,413 7,623
Retained earnings 156,907 155,681
Accumulated other comprehensive income 67,787 48,577
------ ------
279,776 261,914
------- -------
$764,163 $765,658
======== ========
KHD HUMBOLDT WEDAG INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended September 30, 2009 and 2008
(Unaudited)
(U.S. Dollars in Thousands, Except per Share Data)
2009 2008
---- ----
Revenues $148,233 $193,596
Cost of revenues 122,433 157,022
Reduction in loss on terminated customer contracts (2,127) -
Restructuring costs, reversal of write-down of
inventories (1,121) -
------- ---
Gross profit 29,048 36,574
Income from interest in resource property 4,630 9,460
Selling, general and administrative expense (17,950) (12,820)
Stock-based compensation - selling, general
and administrative (206) (1,281)
Restructuring costs (4,063) -
------- ---
Operating income 11,459 31,933
Interest income 2,014 5,720
Interest expense (610) (819)
Foreign currency transaction (losses), gains net (1,413) 7,652
Share of loss of equity method investee (257) 9
Other income (expense), net 1,973 (2,219)
----- -------
Income before income taxes and minority interests 13,166 42,276
Provision for income taxes:
Income taxes (4,110) (9,044)
Resource property revenue taxes (1,052) (2,013)
------- -------
(5,162) (11,057)
------- --------
Income before minority interests 8,004 31,219
Minority interests (529) (415)
----- -----
Net income $7,475 $30,804
====== =======
Basic earning per share $0.25 $1.01
----- =====
Diluted earnings per share $0.25 $1.01
===== =====
Weighted average of common shares outstanding
- basic 30,259,911 30,514,255
- diluted 30,259,911 30,649,899
KHD HUMBOLDT WEDAG INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF INCOME
For the Nine Months Ended September 30, 2009 and 2008
(Unaudited)
(U.S. Dollars in Thousands, Except per Share Data)
2009 2008
---- ----
Revenues $366,208 $474,672
Cost of revenues 296,160 384,559
Reduction in loss on terminated customer contracts (76) -
---- ---
Gross profit 70,124 90,113
Income from interest in resource property 8,552 23,654
Selling, general and administrative expense (55,467) (39,735)
Stock-based compensation recovery (expense)
selling general and administrative 210 (3,407)
Restructuring costs (10,836) -
-------- ---
Operating income 12,583 70,625
Interest income 5,962 16,595
Interest expense (2,024) (1,780)
Foreign currency transaction losses, net (733) (1,369)
Share of loss of equity method investee (278) (40)
Loss on settlement of investment in preferred
shares of former subsidiaries
(9,538) -
Other income (expense), net 3,038 (5,181)
----- -------
Income before income taxes and minority
interests 9,010 78,850
Provision for income taxes:
Income taxes (5,374) (15,150)
Resource property revenue taxes (1,941) (5,104)
------- -------
(7,315) (20,254)
------- --------
Income before minority interests 1,695 58,596
Minority interests (469) (691)
----- -----
Net income $1,226 $57,905
====== =======
Basic earning per share $0.04 $1.91
----- =====
Diluted earnings per share $0.04 $1.89
===== =====
Weighted average of common shares outstanding
- basic 30,385,985 30,360,179
- diluted 30,385,985 30,628,990
KHD HUMBOLDT WEDAG INTERNATIONAL LTD.
FINANCIAL SUMMARY
As of September 30, 2009
(Unaudited)
(U.S. Dollars in Thousands, Except per Share Data and Ratios)
Cash and cash equivalents $407,423
Securities 6,034
Restricted cash 27,135
Working capital 312,155
Total assets 764,163
Shareholders' equity 279,776
Book value per share 9.25
Current ratio 1.79
Long-term debt to equity ratio 0.04
SOURCE KHD Humboldt Wedag International Ltd.
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