2014

ZCL Composites Reports Q4 and Fiscal 2012 Financial Results

EDMONTON, March 7, 2013 /CNW/ - ZCL Composites Inc. (TSX: ZCL) today announced financial results for the year and fourth quarter ended December 31, 2012.

Year 2012 compared with 2011

  • Record revenue of $170.4 million, up $43.3 million or 34% from $127.0 million;
  • Record net income of $13.5 million or $0.47 per share ($0.46 fully diluted), up $10.2 million or $0.36 per share from $3.3 million or $0.11 per share (basic and fully diluted);
  • EBITDA of $22.5 million, up $12.2 million or 118% from $10.3 million;
  • Backlog of $35.2 million, down $7.0 million or 17% from $42.2 million; and
  • Increased the quarterly dividend 25% to $0.025 per share.

Q4 2012 compared with Q4 2011

  • Revenue of $44.9 million, up $7.2 million or 19% from $37.7 million;
  • Net income of $2.8 million or $0.10 per share (basic and fully diluted), up $1.0 million or $0.03 per share from $1.8 million or $0.06 per share (basic and fully diluted); and
  • EBITDA of $5.4 million, up $1.2 million or 29% from $4.2 million.

"ZCL celebrated its 25th anniversary in 2012 with a very strong year," said Ron Bachmeier, President and Chief Executive Officer. "We achieved record revenue and earnings and we improved operating efficiency, clearly demonstrating the successful execution of our "simplify to grow" strategy and our success in moving the company forward.  As a result of this strong performance, our Board has elected to increase the quarterly dividend by 25% to $0.025 per share."

"In 2013, we remain committed to our core product groups and continue to search out new challenges and opportunities for innovation, similar to the successful innovations we achieved with Diesel Exhaust Fluid bulk underground storage tanks over the past two years. Our strategic objectives for 2013 build on prior success in high-grading our customer mix, improving raw materials procurement, level loading our plants, increasing plant efficiencies, tightening discretionary spending and linking our employee incentives to increasing shareholder value."

Financial Results

Revenue for the year ended December 31, 2012 was $170.4 million, up $43.3 million or 34% from $127.0 million for the year ended December 31, 2011. The increase was attributable to both the Underground and Aboveground operating segments. The Petroleum and Corrosion Products groups achieved record revenue with Petroleum Products up 14% from a year earlier and Corrosion Products up 120% from a year earlier. The Water Products group realized moderate revenue growth in 2012 with a 5% increase over the revenue earned in 2011.

Gross profit for the year ended December 31, 2012 was $29.9 million, up $10.5 million or 54% from December 31, 2011 gross profit of $19.5 million. Gross margin increased to 18% of revenue for 2012, up from 15% a year earlier with the increase coming primarily from the Aboveground operating segment.

General and administration ("G&A") expense for the year ended December 31, 2012, decreased $1.4 million or 14% over the year ended December 31, 2011. The reduction in G&A for 2012 compared to 2011 reflected the result of a continued focus on cost controls and cost saving initiatives that were implemented in 2011.

EBITDA for the year ended December 31, 2012 was $22.5 million, up $12.2 million or 118% from $10.3 million a year earlier. EBITDA margin increased to 13% of revenue for 2012, up from 8% a year earlier.

Net income for the year ended December 31, 2012 was $13.5 million, up $10.2 million or 310% from $3.3 million a year earlier.  Net income per share for the 2012 year end was $0.47 ($0.46 fully diluted), up $0.36 from $0.11 (basic and fully diluted) a year earlier. The improvement was attributable to a significant increase in revenue, increased gross profit, lower general and administration expenses and reduced finance expenses.

Backlog and Financial Position

The December 31, 2012 backlog of $35.2 million was down 17% from $45.2 million a year earlier and down $12.3 million or 26% from September 30, 2012. The Aboveground segment accounted for $7.2 million of the decrease over December 31, 2011 with current backlog of $13.6 million.  This decrease in Aboveground backlog is primarily attributable to the completion of a large low margin order that accounted for $6.9 million of the December 31, 2011 backlog. The nature of revenues in the Aboveground operating segment is more dependent on larger orders which leads to higher volatility in the backlog when comparing points in time.

At December 31, 2012, ZCL's balance sheet had working capital (current assets less current liabilities) of $31.7 million, up $8.3 million or 35% from $23.4 million at December 31, 2011.  ZCL eliminated its net debt position throughout the fourth quarter of 2012, as cash and cash equivalents more than offset debt.  Management expects the net debt position to continue to fluctuate due to the inherent seasonality and timing of working capital requirements of the business.

Dividends

With the continued improvement in the financial results, the Board elected to increase the quarterly dividend by 25% to $0.025 per share, up from $0.02 per share in the previous quarter.  The dividend will be paid on April 15, 2013, to the shareholders of record as of March 28, 2013.

Outlook and Priorities

For 2013, we continue to drive toward annual organic revenue growth, however our strategic objectives are now more directly focused on improving profitability.  The five key aspects of the 2013 strategic plan include:

  • Focus on quality:
    • Improve our quality control processes through lean initiatives in order to reduce rework and disruptions in the production flow.
  • Improve profitability:
    • Exceed the 13% EBITDA achieved in 2012 and improve gross margins as a percentage of revenue by 2%.
  • Meet deliveries and reduce lead times:
    • Meet 100% of the customer delivery requirements and shorten lead times by 25% in order to improve the flexibility of the plants and responsiveness to customers.
  • Expand employee integration:
    • Refine our employee compensation package to further align employee goals and objectives with our strategic priorities and shareholder interests.
  • Continued focus on safety:
    • Continuation of the standardization of our safety policies, procedures and metrics.

Summary Financial Results

For the three months ended 2012 2011
(in thousands of dollars, Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31
except per share amounts) $ $ $ $ $ $ $ $
Revenue 44,866 50,067 42,850 32,576 37,716 36,352 29,820 23,158
Net income (loss)                
  Continuing operations 2,876 4,805 4,207 1,602 1,840 1,892 969 (1,247)
  Discontinued operations1 - - - - - - (181) 17
  Total 2,876 4,805 4,207 1,602 1,840 1,892 788 (1,230)
Basic earnings (loss) per share                
  Continuing operations 0.10 0.17 0.15 0.06 0.06 0.07 0.03 (0.04)
  Total 0.10 0.17 0.15 0.06 0.06 0.07 0.02 (0.04)
Diluted earnings (loss) per share                
  Continuing operations 0.10 0.16 0.15 0.06 0.06 0.07 0.03 (0.04)
  Total 0.10 0.16 0.15 0.06 0.06 0.07 0.02 (0.04)
Dividends declared per share 0.02 0.015 0.01 0.01 - - - -
(1) The discontinued operations are the steel tank division sold May 31, 2011 because they were
not part of ZCL's core business.

MD&A and Financial Statements

The Company's management's discussion and analysis ("MD&A") and consolidated financial statements for the years ended December 31, 2012 and 2011, are available on Sedar at www.sedar.com and the ZCL website at this link: http://www.zcl.com/investor-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 March 8, 2013, to discuss its financial and operating results for the year and fourth quarter ended December 31, 2012.

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 continuing operations before finance expense, income taxes, share-based compensation, depreciation on property, plant and equipment, amortization on 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, 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.  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 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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