MFC Bancorp Ltd. Reports Results For The Three Months Ended March 31, 2016

NEW YORK, May 16, 2016 /PRNewswire/ -- MFC Bancorp Ltd. (NYSE: MFCB) (the "Company" or "MFC") announces its results for the three months ended March 31, 2016 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 Canadian dollars unless otherwise stated.)

In the first quarter of 2016, revenues increased slightly to $350.0 million from $349.6 million in the same period of 2015. We continued to make progress in our plans to streamline our operations, exiting certain low margin product lines, reducing expenses and reducing working capital employed. This is an ongoing process. However, we believe this is the basis to improve our profitability and return on capital.

Despite a marginal increase in revenues, primarily as a result of the positive impact of the weaker Canadian dollar against the Euro in the period, our net income from continuing operations attributable to shareholders for the first quarter of 2016 declined to $0.4 million, or $0.01 per share on a basic and diluted basis, from $5.4 million, or $0.09 per share on a basic and diluted basis, in the same period of 2015.

In the first three months of 2016, operating EBITDA from continuing operations was $8.3 million, compared to $14.5 million in the same period 2015.

Operating EBITDA from continuing operations is defined as earnings from continuing operations before interest, taxes, depreciation, depletion, amortization and impairment. Operating EBITDA from continuing operations is a non-IFRS financial measure and should not be considered in isolation or as a substitute for performance measures under IFRS. Management uses Operating EBITDA from continuing operations as a measure of our operating results and considers it to be a meaningful supplement to net income as a performance measure, primarily because we incur depreciation and depletion from time to time.

The following table provides a reconciliation of Operating EBITDA to net income from continuing operations for the periods indicated.

Financial Highlights

As of March 31, 2016, cash and cash equivalents increased to $250.4 million from $197.5 million as of December 31, 2015. We have made progress in reducing our inventories. Inventories were $197.4 million as of March 31, 2016, compared to $245.3 million as of December 31, 2015. Trade receivables increased from $151.2 million as of December 31, 2015 to $207.9 million as of March 31, 2016. The increase in trade receivables was primarily as a result of a reduction of inventories and an increase in strategic receivables to enhance our realizations.  Credit risk from trade receivables is substantially mitigated through credit insurance, bank guarantees, letters of credit and other risk mitigation measures.

The following table highlights selected figures on our financial position as of March 31, 2016 and December 31, 2015:

Credit Lines and Facilities with Banks

We established, utilized and maintain various kinds of credit lines and facilities with banks and insurers. Most of these facilities are short-term. These facilities are used in our day-to-day finance and supply chain business. The amounts drawn under such facilities fluctuate with the kind and level of transactions being undertaken.

As at March 31, 2016, we had credit facilities aggregating $812.3 million comprised of: (i) unsecured revolving credit facilities aggregating $390.2 million from banks. The banks generally charge an interest rate of inter-bank rates plus an interest margin; (ii) revolving credit facilities aggregating $105.2 million from banks for structured solutions, a special trade financing. The margin is negotiable when the facility is used; (iii) a non-recourse specially structured factoring arrangement with a bank for up to a credit limit of $244.5 million for our supply chain activities. We may factor our receivable accounts upon invoicing at the inter-bank rate plus a margin; (iv) foreign exchange credit facilities of $45.0 million with banks; and (v) secured revolving credit facilities aggregating $27.4 million.

All of these facilities are either renewable on a yearly basis or usable until further notice. A substantial portion of our credit facilities are denominated in Euros and, accordingly, such amounts may fluctuate when reported in Canadian dollars.

In addition, we have margin lines with availability at multiple brokers, which can enable us to hedge approximately $129.7 million notional value.

Vision

Our vision is to become a regulated trade finance institution, offering our customers and suppliers a wider range of structured finance solutions including factoring, inventory financing, forfaiting, marketing and other financing solutions.

There are significant opportunities to offer structured and trade finance and banking solutions in the markets we serve as many of our customers and suppliers do not have adequate financing alternatives and could benefit from our services. Leveraging our vertically-integrated supply chain platform, we have insights into financing requirements across the value chain and the ability to offer a full portfolio of structured and trade finance and banking products will allow us to meet the needs of our business partners. 

In the first quarter of 2016, we made important progress towards this goal by completing the acquisition of MFC Merchant Bank Ltd (the "Bank"). As part of our group, the Bank does not engage in retail banking and commercial banking, but instead provides merchant banking and specialty banking services, focused on structured and trade finance, to our customers, suppliers, and group members, among others. The products that the Bank offers include, among others:

• structured and trade finance, including advisory services, in conjunction with export credit agencies;
• merchant banking products and services, with and without recourse factoring;
• forfaiting;
• discounting of bills of exchange and promissory notes;
• purchase financing collateralized by the product;
• inventory financing collateralized by inventory and
• bank guarantees, letters of credit, documentary bank guarantees/stand-by letters of credit, bills of exchange, bills of lading, promissory notes and forwarders' certificate of receipt facilities.

The Bank's customer deposits are mainly comprised of small and medium sized corporate clients, who may also be trade and structured finance customers, as well as our subsidiary companies and other related entities. In addition, we integrate our existing long-standing banking relationships with the Bank to support our corporate vision. 

Stakeholder Communication

Management welcomes any questions you may have and looks forward to discussing our operations, results and plans with stakeholders:

• Stakeholders are encouraged to read our entire management's discussion and analysis for the three months ended March 31, 2016 and our unaudited financial statements for the three months ended March 31, 2016, which are available for download under the Company's profile at www.sec.gov or at www.sedar.com, for a greater understanding of our business and operations.
• All stakeholders who have questions regarding the information in this Quarterly Report may call our North American toll free line: 1 (844) 331 3343 or International callers: +1 (604) 662 8873 to book a conference call with members of our senior management. Questions may also be emailed to Rene Randall at [email protected].

Comments

Gerardo Cortina, President and Chief Executive Officer of the Company, commented: "Historically, we have operated in a net cash position; however, in 2014, after the acquisitions of two leveraged companies, this situation changed. We have implemented an action plan with the goal of restoring our net cash position in 2016 by reducing inventories and trade receivables and rationalizing other assets. In addition, the action plan is expected to reduce our structural cost profile by streamlining our businesses." 

Mr. Cortina concluded: "We wish to thank all our stakeholders and our banks for their support. We are making progress, but as of today we are not satisfied with the results. We have a plan and a vision. We will work diligently to execute them in order to enhance value for our stakeholders."

About MFC

MFC is a finance and supply chain company, which facilitates the working capital and other requirements of our customers and suppliers.  Our business activities involve customized structured financial solutions and are supported by captive sources and products secured by third parties.  We do business in multiple geographies and specialize in a wide range of industrial products such as metals, minerals, steel products, and ferro-alloys.

Disclaimer for Forward‐Looking Information

This news release contains statements which are, or may be deemed to be, "forward‐looking statements" which are prospective in nature, including, without limitation, statements regarding the Company's business plans, its strategy to reduce trade receivables and inventories, the integration of the Bank, future business prospects and any statements regarding beliefs, expectations or intentions regarding the future. 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) our ability to enforce our rights, and recover expected amounts,  related to our insolvent customer through existing collateral, guarantees, mortgages and other mitigation securities; (vi) our ability to realize the anticipated benefits of our acquisitions; (vii) additional risks and uncertainties resulting from strategic investments, acquisitions or joint ventures; (viii) counterparty risks related to our trading and finance activities; (ix) our ability to execute, and the timing and amounts received as a result of, our plan to rationalize certain hydrocarbon properties and iron ore interests; (x) operating hazards; and (xi) 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 2015 Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission and with the Canadian securities regulators and our Management's Discussion and Analysis for the three months ended March 31, 2016, filed with the Canadian securities regulators.

SOURCE MFC Bancorp Ltd.