MFC Industrial Ltd. Reports Results For The Year Ended December 31, 2013 - Revenues increased by 68 percent -

NEW YORK, March 31, 2014 /PRNewswire/ -- MFC Industrial Ltd. ("MFC" or the "Company") (NYSE: MIL) announces its results for the year ended December 31, 2013 and provides an update on its recent corporate developments. The Company's financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). (All references to dollar amounts are in United States dollars unless otherwise stated.)    


2013 HIGHLIGHTS

For the year ended December 31, 2013


  • Revenues increased by 68% to $813.9 million for the year ended December 31, 2013, compared to the same period in 2012.

  • EBITDA was $65.4 million for the year ended December 31, 2013.*

  • Net income for the year ended December 31, 2013 decreased to $9.7 million, or $0.15 per share on a diluted basis, compared to $200.1 million, or $3.20 per share, for the same period of 2012.* This was primarily due to the recognition of a bargain purchase of $218.7 million, or $3.50 per share, in the 2012 period and higher costs of sales, depletion and impairments in 2013.

  • Completion of a participation arrangement with a drilling partner at Niton (the "Drilling Partner"), who will spend a minimum of CDN$50 million to drill at least 12 net wells on our undeveloped lands in the next three years. MFC can elect to participate for 30% on a look-back basis in such wells or we can elect to receive a 10% gross royalty on the related production. In addition, we will process a substantial portion of the natural gas though our processing plant. Our Drilling Partner has already commenced drilling its first well.

  • Annual cash dividend for 2013 was $0.24 per common share and was paid in equal quarterly installments of $0.06 per common share.

  • Our natural gas hedges currently consist of an outstanding short position of approximately $87.5 million of NYMEX natural gas swaps with maturities ranging from August 2014 to March 2015 at an average weighted price of $4.39 per mcf. 

  • Maintained the integrity of our balance sheet and financial ratios. 

* Note: EBITDA (earnings before interest, taxes, depreciation, depletion and impairment) is not a measure of financial 

  performance under IFRS, has significant limitations as an analytical tool and should not be considered in isolation or

  as a substitute for analysis of our results as reported under IFRS. See page 6 of this news release for a

  reconciliation of our net income to EBITDA. Certain 2012 figures were recast. Please refer to notes 3 and 41 of our

  audited annual financial statements for the year ended December 31, 2013.


Our net income for the fourth quarter of 2013 was disappointing, even though we saw revenue growth. This situation primarily arose from comprehensive internal reviews that were carried out at year end which resulted in significant non-cash adjustments totaling $15.1 million.                               


2013 MAJOR DISAPPOINTMENTS

For the three months ended December 31, 2013


  • Our net loss of $12.6 million for the fourth quarter of 2013 was disappointing.

  • Primary cause of the loss:
    • Increased general and administrative expenses without immediate benefit.
    • Reduction in our non-cash deferred income tax assets - $4.9 million.
    • Adjustment of non-cash depletion and depreciation - $4.1 million.
    • Non-cash impairment charge on our resource properties primarily because of a change in the forward price used in the 2013 valuation versus 2012 which projected a lower long-term price for natural gas - $6.1 million.

In 2013, our revenues grew by 68% compared to the same period in 2012. This was good progress, but we can certainly improve. Our EBITDA for the year was $65.4 million.


2014 MAJOR DEVELOPMENTS

Subsequent events for the three months of 2014


  • Our acquisition of a 100% interest in FESIL AS Group ("FESIL"), a vertically integrated supply-chain management company with a production facility in Norway, is completing concurrently herewith. They also have sales companies in Germany, Luxembourg, Spain, the United States and China and an interest in several quartz deposits in Spain. Headquartered in Trondheim, Norway, FESIL is one of the leading producers of ferrosilicon, an essential alloy in the production of steel, stainless steel and cast iron.

  • On February 11, 2014, Cliffs Natural Resources ("Cliffs"), the operator of the Wabush Mine ("Wabush"), announced that it will idle Wabush by the end of the first quarter of 2014 due to high operating costs at the mine. We have started a dialogue with other stakeholders to rationalize this asset.

  • On March 11, 2014, MFC acquired F.J. Elsner & Co GmbH ("Elsner"), a global commodities supply company which was founded in 1864, with its head office based in Vienna, Austria. Elsner is focused on a full range of steel and related products. 

  • In March 2014, MFC announced its annual cash dividend for 2014 will be $0.24 per common share, as well as the appointment of a new Chief Financial Officer.

  • Our goal for 2014 is to double our commodities and resource revenue and realize the related margins as we integrate the new companies.

 

FINANCIAL HIGHLIGHTS

All amounts in thousands, except per share amount and ratios


December 31, 2013

Cash, cash equivalents and securities

$        334,241

Short-term deposits

4,381

Trade receivables

115,678

Current assets

711,021

Total assets

1,318,598

Current liabilities

314,709

Working capital

396,312

Current ratio*

2.26

Acid test ratio*

1.60

Total liabilities

618,857

Shareholders' equity

699,570

Equity per common share

11.18


* Note: The current ratio is calculated as current assets divided by current liabilities. The acid

  test ratio is calculated as cash and cash equivalents plus short-term cash deposits, short-term

  securities and receivables divided by total current liabilities (excluding liabilities relating to assets

  held for sale).

LIQUIDITY

As at December 31, 2013, we had cash and cash equivalents, short-term deposits and securities of $338.6 million. We monitor our capital on the basis of our debt-to-adjusted capital ratio and long-term debt-to-equity ratio.


LIQUIDITY                                                                           

All amounts in thousands


   December 31, 2013

December 31, 2012

Total debt (current/long-term portions)

$         234,740

$          162,993

Less: cash and cash equivalents

(332,173)

(273,790)

Net debt (net cash & cash equivalents)

(97,433)

(110,797)

Shareholders' equity

699,570

730,587


LONG-TERM DEBT

The long-term debt-to-equity ratio is calculated as long-term debt divided by shareholders' equity.


LONG-TERM DEBT AND DEBT METRICS                                                   

All amounts in thousands, except ratio


 December 31,  2013

December 31, 2012

Long-term debt, less current portion

$      189,871

    $      118,824*

Shareholders' equity

699,570

730,587

Long-term debt-to-equity ratio

0.27

0.16


* Note: This table does not include the term financing relating to our gas processing

  plant as it involved a purchase option and future processing fees. The option was

  exercised in 2013.

CREDIT FACILITIES

We maintain various kinds of credit lines and facilities with banks and insurers. Most of these facilities are short-term and are used for day-to-day business and structured financing activities in commodities. The amounts drawn under such facilities fluctuate with the type and level of transactions being undertaken.

As at December 31, 2013, we had credit facilities aggregating $511.6 million, comprised of: (i) unsecured revolving credit facilities aggregating $220.5 million from banks; (ii) revolving credit facilities aggregating $68.9 million from banks for structured solutions, a special trade financing where the margin is negotiable when the facility is used; (iii) a non-recourse factoring arrangement with a bank for up to $130.9 million for our commodities activities. We may factor our commodity receivable accounts upon invoicing at the inter-bank rate plus a margin; (iv) a foreign exchange credit facility of $53.3 million with a bank; and (v) secured revolving credit facilities aggregating $38.0 million. All of these facilities are renewable on a yearly basis.

CASH FLOWS

Due to the type of businesses we engage in, our cash flows are not necessarily reflective of net earnings and net assets for any reporting period. As a result, instead of using a traditional cash flow analysis solely based on cash flow statements, our management believes it is more useful and meaningful to analyze our cash flows by overall liquidity and credit availability. The global commodity supply chain business can be cyclical and our cash flows vary accordingly. Our principal operating cash expenditures are for financing trading of securities, commodities financing and general and administrative expenses.

RESULTS FOR THE YEAR ENDED DECEMBER 31, 2013

Total revenues for the year ended December 31, 2013 increased 68% to $813.9 million, compared to $485.7 million in 2012. Revenues were up for the year ended December 31, 2013 because of several factors, including the integration of our new operations and increases in volumes for some of our commodities.

EBITDA for the year ended December 31, 2013 increased to $65.4 million. EBITDA has significant limitations as an analytical tool and should not be considered in isolation or as a substitute for our results as reported under IFRS. See page 6 of this news release for a reconciliation of net income to EBITDA.

Net income for the year ended December 31, 2013 decreased to $9.7 million, or $0.15 per share on a diluted basis, from $200.1 million (which included a bargain purchase gain of $218.7 million), or $3.20 per share on a diluted basis, for the same period last year. Net income for the year was down primarily due to:

  • higher costs of sales;
  • depreciation and depletion;
  • impairments and income tax adjustments; and
  • the catastrophic flooding in Alberta, Canada.

The income statement for the year ended December 31, 2013 includes non-cash depletion and depreciation expenses of approximately $28.1 million, as well as an impairment charge of $6.1 million, representing an aggregate of $0.54 per share on a diluted basis. Depletion and depreciation are non-cash expenses and represent the amortization of the historical cost of our natural gas assets and other assets over their economic life. They are income statement expenses but are added back in the cash flow statement.

Revenues for our commodities and resources business were $778.5 million for the year ended December 31, 2013, compared to $455.9 million for the same period in 2012. Included are the gross revenues generated by our iron ore royalty interest which, for the year ended December 31, 2013, were approximately $25.7 million, compared to $29.1 million in 2012. A total of 2.8 million tons of iron ore products were shipped during 2013, compared to 3.2 million tons shipped during the same period in 2012.

Revenues from our merchant banking business were $12.6 million for the year ended December 31, 2013, compared to $11.8 million for the same period in 2012.

Other revenues, which encompass our corporate and other operations, were $22.9 million for the year ended December 31, 2013, compared to $18.0 million for the same period in 2012.

Costs of sales increased to $710.4 million during the year ended December 31, 2013 from $406.7 million for the same period in 2012. Selling, general and administrative expenses increased to $63.1 million for the year ended December 31, 2013 from $47.7 million for the same period in 2012. 

OVERVIEW OF OUR RESULTS FOR THE YEAR ENDED DECEMBER 31, 2013

Our total revenues by operating segment for each of the years ended December 31, 2013 and 2012 are broken out in the table below:


REVENUES                                                               

  All amounts in thousands


December 31, 2013

twelve months

December 31, 2012

twelve months

Commodities and resources 

$     778,487

$     455,898

Merchant banking

12,568

11,751

Other

22,883

18,010

Total revenues

$     813,938

$     485,659


Our net income from operations for each of the years ended December 31, 2013 and 2012 are broken out in the table below:


   INCOME FROM OPERATIONS   

   All amounts in thousands, except per share amounts


December 31, 2013

twelve months

December 31, 2012

twelve months

Commodities and resources

$      7,350

    $   (23,946)(1)

Merchant banking

18,293

           231,632(2)

Other

(9,564)

(9,301)

Income before income taxes

16,079

198,385

Income tax recovery (expenses)

(1,574)

8,528

Resource property revenue tax

   expenses

 

(5,003)

 

(5,902)

Net loss (income) attributable to

   non-controlling interests         

 

163

 

(867)

Net income attributable to our

   shareholders

 

$      9,665

 

$  200,144

Earnings per share, diluted

$        0.15

$        3.20


Notes:   (1) Including impairment of interest in resource properties of $42.6 million and inventory write-off of $19.4

                   million in a former subsidiary.

             (2) Including bargain purchase of $218.7 million.


EBITDA BREAKDOWN

EBITDA is defined as earnings before interest, taxes, depreciation, depletion and impairment. Management uses EBITDA as a yardstick measurement of its own operating results, and as a benchmark relative to its competitors. Management considers it to be a meaningful supplement to net income as a performance measure primarily because we incur depreciation, depletion and impairment expenses and EBITDA generally represents cash flow from operations.  The following table reconciles our EBITDA to net income for the year ended December 31, 2013.


EBITDA (earnings before interest, taxes, depreciation, depletion  and impairment)

All amounts in thousands


December 31, 2013

Net income

$          9,502

Income taxes

6,577

Finance costs

15,172

Depreciation, depletion and impairment

34,162

   EBITDA

$        65,413


UPDATE ON OUR NATURAL GAS & MIDSTREAM FACILITIES

Since the acquisition of the natural gas and midstream facilities, which significantly expanded our global commodities platform into the energy sector, we have been determined to expand these operations as they present an opportunity for growth through value-added projects and the consolidation of regional gas production. To this end, we are in the process of segregating our various operations into three distinct energy divisions:

MFC Energy ("MFCE")
MFCE will act as the corporate office and administrative center for all these energy divisions. It will seek to leverage the existing asset base in transactions that add value to MFC and its shareholders.

MFC Processing ("MFCP")
This entity will manage the existing natural gas processing assets of MFCE on a standalone basis. The following table sets out our average sales prices, operating costs, royalty amounts, transportation costs and total production for the year ended December 31, 2013:


NATURAL GAS  WELLS (COSTS AND PRODUCTION)  

All amounts in Canadian dollars, except production numbers

  For the year ended December 31, 2013


Natural Gas

($/mcf)

NGLs (1)

($/bbl)

Crude Oil

($/bbl)

Total

($/boe)

Price(2)

$      3.46

$   75.63

$   84.98

$   30.72

Royalties

0.62

24.53

20.78

6.81

Transportation costs

0.14

4.92

2.29

1.37

Operating costs(3)

---

---

---

12.38

Production(4)

17,522 mmcf

411.6 mboe

118.7 mbbl

3,450 mboe








Notes:

(1)

Includes sulphur.


(2)

Average sales price includes third party processing fees.


(3)

A portion of our natural gas production is associated with crude oil production.

Excludes the impact of hedging on prices and does not include non-cash operating

costs of CDN$8.96 per boe consisting of depletion and depreciation. Operating

costs per individual product are not available as they are charged to gas production

only and any allocation would be arbitrary.


(4)

Net of other working interests.


Our land bank as at December 31, 2013 was 268,875 net undeveloped acres (1,088.1 square kilometers) which we do not plan to sell or develop at this time.

We will develop midstream businesses at our existing Mazeppa facility, and identify and grow the midstream business through re-purposing existing midstream assets or by investing in new projects.

The restructuring of this emerging midstream business is underway with several MFCE assets identified to be created or transferred to this new division, including:

  • Consolidation of the processing facility in the Niton area (the "Niton Plant") into MFCP. The Niton Plant will process substantially all gas produced under the participation agreement.
  • Consolidation of the processing facilities in the Callum & Cowley area into MFCP.
  • Consolidation of our compression and gas gathering system, which is one of largest such systems in Southern Alberta.
  • Construction of a 15MW generating plant at our facility, which is proceeding on schedule.
  • Increasing the Niton Plant's capacity through a debottlenecking project to increase processing revenue from our Drilling Partner and from other third party production. New drilling from our Drilling Partner should increase natural gas production in the area.

    • Our Drilling Partner will spend a minimum of CDN$50 million to drill at least three new wells per year for a total of 12 net wells (to a minimum of 800 horizontal meters each) during the initial three-year term. They are in the process of completing drilling of the first well.
    • Our Drilling Partner will pay 100% of the drilling and completion costs of each well at its own sole risk and expense.
    • After a well is drilled and there is continuous production, we can elect to participate for up to a 30% working interest in each well on a look-back basis by paying 25% of its actual costs; or we can elect to receive a 10% gross royalty on future production instead.
    • Drilling is currently underway.

  • Planning strategies for a deep-cut and fractionation plant that will generate additional revenue from the sales of natural gas liquids (extracted from natural gas) including: ethane, propane and butane.

MFC Marginal Wells ("MFCW") (in development)

  • Provide up-stream marginal well production and services.
  • Focus on improving production through innovation and cost optimization.
  • Acquire similar marginal well assets and apply best practices to lower costs or raise production through economies of scale and technical ability.

    • MFCW would be an upstream-marginal well operator and a service provider.
    • MFCW's assets would be comprised of certain MFCE's assets located in Southern Alberta which share similar operating characteristics.
    • This division was created to operate a specialized low-cost structure that the shallow, dry and low-production wells require. In addition to the existing MFCE assets, MFCW would grow through the acquisition of similar assets that are accretive in terms of reduced operating costs and increased production.

Hedging Natural Gas Derivatives

In December 2013, to hedge the volatility of natural gas prices and organically long nature of our natural gas subsidiary, we entered into a short position of long-term NYMEX natural gas swaps with a notional value of approximately $50 million

In January and February, as natural gas prices continued to rise, we increased our position using shorter-duration swaps which had risen with the uncharacteristically cold winter weather.  We continue to hold these hedging derivatives and, as of March 28, 2014, we were short approximately $87.5 million of NYMEX natural gas swaps with maturities ranging from August 2014 to March 2015 at an average weighted price of $4.39 per mcf. 

UPDATE ON OUR COMMODITIES PLATFORMS

In 2013 MFC Commodities GmbH ("MFCC") continued to intensify its business relationships with the wood pellets industry, which started in 2005. The global pellets industry is growing not only in Europe but also in North America. MFCC will now purchase wood pellets from their production in the United States and transport the goods by sea to Europe.  

MFCC has further strengthened its focus on structured supply chain transactions, in combination with its logistics expertise. For example, MFCC has entered into an offtake agreement with a Yakutian producer of sawn larch wood and structured the transaction. Besides sales and risk management, transport logisitics from Yakutia to Europe are a key element of such a transaction.

MFCC has continued to integrate its supply chain and logistics activities in order to enhance business opportunities on a global scale. We have been able to identify additional sourcing opportunities and have expanded our sales teams and continue to search for specialists in these new markets.

The importance of MFC China continues to grow with our expansion, primarily in sourcing and supply. The allocation of additional staff to work alongside existing employees in China will improve our communications, quality control and logistics.

UPDATE ON THE ROYALTY INTEREST (WABUSH MINE)

For the year ended December 31, 2013, Cliffs shipped a total of 2,840,039 tons of iron ore pellets and concentrate, compared to 3,189,443 tons in 2012. The average gross royalty realized price per ton (ore pellets and/or concentrate) for the year ended December 31, 2013 was CDN$9.35.

In February 2014 Cliffs announced a significant reduction in previously planned 2014 capital expenditures and, due to the current pricing environment, decided to idle Wabush by the end of the first quarter of 2014.

This will have an effect on our earnings going forward and we have now started a dialogue with other stakeholders to rationalize this asset.

2014 MAJOR DEVELOPMENTS (SUBSEQUENT EVENTS)

FESIL AS Group

Our acquisition of FESIL is completing concurrently herewith. FESIL is a vertically integrated commodity supply chain company with a production facility in Norway, sales companies in Germany, Luxembourg, Spain, the United States and China, and an interest in quartz deposits in Spain. 

Headquartered in Trondheim, Norway, FESIL is one of the leading producers of ferrosilicon, an essential alloy in the production of steel, stainless steel and cast iron. 

FESIL's melting plant is located in Mo i Rana and produces a range of ferrosilicon products including granulated and refined qualities (high and semi-high purity), which makes up the bulk of its production. Annual capacity of the plant is approximately 80,000 tonnes of ferrosilicon and 23,000 tonnes of microsilica. The facility is certified according to ISO 9001 and ISO 14001 and complies with Norway's strict environmental and operational requirements. The purchase price of approximately 500 million Norwegian Krone (approximately $82 million) is based on the net tangible asset value as of September 30, 2013, and will be adjusted to reflect the fair value of certain assets and the operating results over the period to final closing.  In addition to the purchase price, MFC will pay a royalty based on tiered ferrosilicon production at the Mo i Rana facility for two years, which is expected to equal approximately 2.9% of ferrosilicon revenue per annum at full production. 

FESIL reported net revenues in 2013 of approximately 2.9 billion Norwegian Krone (approximately $487.5 million) with its alloy production representing just over 25% of net revenue.  Approximately 60% of FESIL's ferrosilicon production is sold directly through its own sales offices to customers which include some of the world's leading steelworks, aluminum/iron foundries and chemical groups. The sales offices also sell a number of complementary products including ferroalloys, metals, minerals, and specialty products. FESIL is a strategic acquisition that will add geographic reach, a diverse product portfolio, an established brand name, a well-respected management team and excellent employees to our global commodity supply-chain platform. 

F.J. Elsner & Co. GmbH

In March 2014, MFC acquired a 100% interest in Elsner, a global commodity supply chain company focused on steel and related products with offices in Vienna, Austria and which was founded in 1864.

Elsner's offerings include a full range of steel products including slabs, booms, billets, hot rolled steel plates, hot and cold rolled coils and sheets, reinforcing bars, galvanized material, pipes, tubes and merchant bars. Elsner has longstanding relationships with many steel mills in Eastern and Southern Europe as well as the Baltic States and the CIS. 

Revenue for the fiscal year ended June 30, 2013 was $145.5 million and they offer significant diversification with their products, customers and suppliers. The purchase price is for nominal consideration and certain contingent payments. The following highlights certain opportunities related to the acquisition of Elsner:

  • We will now offer structured solutions to Elsner's customers and suppliers.
  • The ability to market steel related raw materials to our current suppliers and industry contacts.
  • Our supply chain structured solutions will reduce risks and expand the customer base.
  • We may enter into exchange transactions for the supply of raw materials for offtake products with customers.

Elsner is a company now approaching its 150th anniversary and provides MFC with a solid customer base, an excellent product portfolio and an extremely well-respected management and trading team which will enhance our global supply chain platform.

2014 Cash Dividend  

On March 24, 2014, MFC Industrial Ltd. announced that its Board of Directors has declared an annual cash dividend for 2014 of $0.24 per common share. The 2014 cash dividend will be paid in quarterly installments by the Company.

The first payment of $0.06 per common share will be paid on April 22, 2014 to shareholders of record on April 10, 2014.  For such payment, the Company's common shares will trade ex-dividend on April 8, 2014. The remaining quarterly dividend payments in 2014 are expected to be made as follows:

  • Second payment of $0.06 will be made July;
  • Third payment of $0.06 will be made September; and
  • Final payment of $0.06 will be made November.

The dividend is subject to customary Canadian withholding tax for non-resident shareholders. Pursuant to applicable tax treaties the withholding rate for eligible U.S. resident shareholders is 15%. The dividend is an eligible dividend under the Income Tax Act (Canada). The declaration, timing and payment of future dividends will depend on, among other things, the Company's financial results.

Chief Financial Officer Appointment

The Company also announced on March 24, 2014, that its Board of Directors had appointed James M. Carter as Chief Financial Officer. He is a Chartered Accountant with over 40 years of experience in both public and private companies, with an emphasis on the commodities sector and international business markets. He has served as Vice-President of the Company for over 15 years.

The Board

The Board of Directors also elected Peter Kellogg as Chairman and appointed Dr. Shuming Zhao as a Director of the Company. The Company is continuing its search for a new CEO and announced that Michael Smith currently intends to retire at the annual meeting of the Company scheduled for the end of this year.

Mr. Smith will continue to serve as a Director of the Company and plans to work with the Board in searching for a successor to ensure an orderly transition.

Corporate Changes

The Board of Directors of the Company has also determined to declassify its Board structure so that all of the Company's Directors will be elected on an annual basis. It is intended that amendments to the Company's Articles will be submitted to the Company's shareholders at its next annual meeting to effect this change. In addition, the Board terminated the Company's shareholder rights plan agreement dated November 11, 2013.

CORPORATE TAXATION

We are a company that strives to be fiscally responsible. The corporate income tax paid in cash was approximately $2.2 million for the year ended December 31, 2013.

COMMENTS

Michael Smith, President and Chief Executive Officer, commented: "The supply of commodities is a top-line driven business with narrow margins and cyclical movements affect our operating results accordingly. As the overall world economy continues to recover and grow, we anticipate these revenues and operating results will be enhanced. With the expansion of our commodity platform into new products and new markets, we saw pricing of some commodities come under pressure during the year. We still need to improve our margins as they are not at what we believe are acceptable levels.

"In addition to this anticipated organic growth, the recently announced acquisitions of FESIL and Elsner are expected to significantly increase our commodities and resources revenues, which were $778.5 million in 2013, and provide a meaningful contribution to net income.

"We have kept to our historic policy, which with any expansion or acquisition is to not dilute our shareholders by issuing any new shares, as well as maintaining our financial discipline with our balance sheet and financial ratios."

Mr. Smith concluded, "On a very personal note we announced the passing of one of our Directors this year, Robert Ian Rigg. Ian was a valuable member of the Board since 2010 and was the chair of our audit committee and a member of our corporate governance committee. Ian provided indispensable guidance to the Company in financial matters over the years. He will truly be missed."

Shareholders are encouraged to read the Company's entire Annual Report on Form 20-F, which includes annual audited  financial statements and management's discussion and analysis for the year ended December 31, 2013, filed with the U.S. Securities and Exchange Commission and Canadian securities regulators today, for a greater understanding of the Company.

Today at 10:00 a.m. EDT (7:00 a.m. PDT), a conference call will be held to review MFC's announcement and results. This call will be broadcast live over the Internet at www.mfcindustrial.com.  An online archive will be available immediately following the call and will continue for seven days. You may also listen to the audio replay by phone by dialing: 1 (888) 286 8010, using conference number 53534174. International callers dial: 1 (617) 801 6888.

About MFC Industrial Ltd.

MFC is a global commodity supply chain company and is active in a broad spectrum of activities related to the integrated combination of commodities and resources interests. We also provide logistics, financial and risk management services to producers and consumers of commodities. To obtain further information on the Company, please visit our website at: http://www.mfcindustrial.com.

Disclaimer for Forward-Looking Information

This document contains statements which are, or may be deemed to be, "forward-looking statements" which are prospective in nature, including, without limitation, statements regarding our future plans, including in respect of partnerships and joint ventures respecting our processing facilities and related expansion projects, implementation of current strategies and our plans for our projects and the future plans and projections of the operator of our royalty interest. Forward-looking statements are not based on historical facts, but rather on current expectations and projections about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as "plans", "expects" or "does not expect", "is expected", "scheduled", "estimates", "forecasts", "projects",  "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, revenues, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Important factors that could cause our actual results, revenues, performance or achievements to differ materially from our expectations include, among other things: (i) periodic fluctuations in financial results as a result of the nature of our business; (ii) commodities price volatility; (iii) economic and market conditions; (iv) competition in our business segments; (v) decisions and activities of operators of our resource interests or any revisions to their current plans and projections, which could be made without notice to us; (vi) the availability of commodities for our commodities and resources operations; (vii) the availability of suitable acquisition or merger or other proprietary investment candidates and the availability of financing necessary to complete such acquisitions or development plans; (viii) our ability to realize the anticipated benefits of our acquisitions; (ix) additional risks and uncertainties resulting from strategic investments, acquisitions or joint ventures; (x) counterparty risks related to our trading activities; (xi) unanticipated grade, geological, metallurgical, processing or other problems experienced by the operators of our resource interests (xii) delays in obtaining requisite environmental and other permits or project approvals; (xiii) potential title and litigation risks inherent with the acquisition of distressed assets; (xiv) risks related to exploration, development and construction of a previously shut-down mine project, including the suitability and integrity of historic mine structures; (xv) the availability of services and supplies; (xvi) operating hazards; and (xvii) other factors beyond our control. Such forward-looking statements should therefore be construed in light of such factors. Other than in accordance with its legal or regulatory obligations, the Company is not under any obligation and the Company expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  Additional information about these and other assumptions, risks and uncertainties are set out in our Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission and our Management's Discussion and Analysis for the year ended December 31, 2013, filed with the Canadian securities regulators.

AUDITED FINANCIAL TABLES FOLLOW –


MFC INDUSTRIAL LTD

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 31, 2013 and 2012

(Audited)

(United States Dollars in Thousands)


 

ASSETS

 

December 31,

December 31,


2013

2012

Current Assets

 



Cash and cash equivalents

$    332,173

$    273,790

Short-term cash deposits

4,381

182

Securities

2,068

6,658

Restricted cash

312

889

Trade receivables

115,678

72,820

Other receivables

30,409

18,314

Inventories

88,844

142,925

Real estate held for sale

12,676

12,210

Deposits, prepaid and other

27,136

27,833

Assets held for sale

97,344

124,192

                Total current assets

711,021

679,813







 Non-current Assets

 



Securities

2,465

9,637

Equity method investments

24,366

22,382

Investment property

-

34,152

Property, plant and equipment

94,493

80,139

Interests in resource properties

359,822

383,745

Hydrocarbon probable reserves

75,267

99,142

Hydrocarbon unproved lands

31,354

31,701

Accrued pension assets, net

1,259

-

Deferred income tax assets

17,941

19,136

Other

610

776

                Total non-current assets

607,577

680,810

                                Total assets

$ 1,318,598

$ 1,360,623







 

 


MFC INDUSTRIAL LTD

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (cont'd)

December 31, 2013 and 2012

(Audited)

(United States Dollars in Thousands)


 

LIABILITIES AND EQUITY




December 31,

December 31,


2013

2012

 Current Liabilities

 



Short-term bank borrowings

$     129,783

$     150,396

Debt, current portion

44,869

44,169

Account payables and accrued expenses

126,649

79,403

Facility term financing

10,462

Income tax liabilities

1,891

2,866

Deferred sale liabilities

26,637

Liabilities relating to assets held for sale

11,517

29,806

                Total current liabilities

314,709

343,739




 Long-term Liabilities

 



Debt, less current portion

189,871

118,824

Facility term financing

12,263

Deferred income tax liabilities

3,571

3,391

Decommissioning obligations

105,854

136,642

Accrued pension obligations, net

-

1,228

Puttable instrument financial liabilities

3,936

7,761

Other

916

-

                Total long-term liabilities

304,148

280,109

                         Total liabilities

618,857

623,848







EQUITY

 



Capital stock, fully paid

383,116

382,746

Treasury stock

(68,980)

(68,610)

Contributed surplus

13,037

13,037

Retained earnings

398,448

399,574

Accumulated other comprehensive income (loss)

(26,051)

3,840

Shareholders' equity

699,570

730,587

Non-controlling interests

171

6,188

Total equity

699,741

736,775


$ 1,318,598

 

$ 1,360,623

 

 

 


MFC INDUSTRIAL LTD

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Year Ended December 31, 2013 and 2012

(Audited)

(United States Dollars in Thousands, Except Per Share Amounts)






2013

2012




Net Sales

$  806,831

$  479,507

Equity income

7,107

6,152

      Gross revenues

813,938

485,659




Costs and Expenses:



      Costs of sales

710,355

406,708

      Impairment of available-for-sale securities

517

4,265

      Impairment of interest in resource properties

6,077

42,631

      Selling, general and administrative

63,092

47,737

      Share-based compensation – selling, general and

         administrative

 

 

9

      Finance costs

15,172

11,634


795,213

512,984




 Income (loss) from operations

18,725

(27,325)




 Other items:



     Exchange differences on foreign currency transactions

(1,820)

7,108

 Change in fair value of puttable instrument financial

   liabilities

 

(826)

 

(77)

     Bargain purchase

218,679




 Income before income taxes

16,079

198,385

 Income tax (expense) recovery:



       Income taxes

(1,574)

8,528

       Resource property revenue taxes

(5,003)

(5,902)


(6,577)

2,626




 Net income for the period

9,502

201,011

 Net loss (income) attributable to non-controlling interests

163

(867)

 Net income attributable to owners of the parent company

$     9,665

$ 200,144




 Basic earnings per share 

$       0.15

$       3.20

 Diluted earnings per share 

$       0.15

$       3.20







 Weighted average number of common shares

    outstanding   

                           - basic

62,552,126

62,555,438

                    - diluted

62,756,791

62,555,438


 

 

SOURCE MFC Industrial Ltd.



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http://www.mfcindustrial.com

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