Shawcor Ltd. Announces Fourth Quarter and Full Year 2010 Results

Mar 03, 2011, 18:28 ET from ShawCor Ltd.

TORONTO, March 3, 2011 /PRNewswire-FirstCall/ --

- Fourth quarter revenue of $292 million improved by 3% over the $283 million reported in the third quarter of 2010 and increased by 12% over the fourth quarter of 2009.

- EBITDA in the fourth quarter increased by 10% to $64.4 million from $58.8 million in the third quarter of 2010 and improved by 20% over the $53.7 million reported in the fourth quarter of 2009.

- Net income in the fourth quarter reached $50.8 million or $0.71 per share diluted as a result of the improvement in income from operations and the recording of a $18.0 million gain, or $0.25 per share diluted, from the revaluation of the Company's investment in its Brazil pipe coating business following the acquisition of an additional 50% interest in October 2010.

- Backlog at December 31, 2010 remained strong at $375 million, a level slightly below the $382 million at the prior quarter end.

"I am pleased to report that ShawCor's fourth quarter financial results showed a continued improvement from the levels seen in the first half of this year. The Company is now benefiting from increased small diameter pipeline project activity in North America, the US$185 million PNG LNG pipe coating project in Asia Pacific is in full production, and our EMAR operations have commenced production on the US$ 85 million Total Laggan - Tormore project", said Bill Buckley, President and CEO of ShawCor Ltd.

Mr. Buckley added, "During the fourth quarter of 2010 and in the first two months of 2011, the Company's bidding activity has reached an unprecedented level with outstanding firm bids now exceeding $1.5 billion. Based on our expectation that many of the project bids will proceed to full development, and several will be awarded to the Company, we remain confident that 2011 offers the potential for growth in the Company's order backlog."


    Financial summary
                                Three Months Ended          Year Ended
                                   December 31,            December 31,
    (in thousands of
    Canadian dollars except
    per share amounts)             2010       2009         2010         2009
    Operating Results
    Revenue                 $   292,086 $  260,911 $  1,034,163 $  1,183,978
    Cost of goods sold          176,293    154,183      623,641      695,521
    Gross profit                115,793    106,728      410,522      488,457

    Selling, general and
    administrative expenses      50,371     48,638      221,440      219,557
    Research and development
    expenses                      2,788      3,103       11,050       10,967
    Foreign exchange (gains)
    losses                       (1,749)     1,284       (5,745)       3,790
    Amortization of
    property, plant and
    equipment                    12,805     14,044       50,376       57,244
    Amortization of
    intangible assets             1,958      1,095        5,246        4,380
    Impairment of intangible
    assets and goodwill           1,166          -        1,166            -
    Income from operations       48,454     38,564      126,989      192,519
    Gain on revaluation of
    investment                   17,979          -       17,979            -
    Investment loss on
    long-term investment         (1,939)          -      (1,939)            -
    Interest expense - net         (451)      (762)      (2,503)      (4,672)
    Income before income
    taxes                        64,043     37,802      140,526      187,847
    Income taxes                 13,275      6,276       35,136       56,397
    Net income                   50,768     31,526      105,390      131,450
    Net Income per share
    (Class A and B)
    Basic                   $      0.72 $     0.44 $       1.49 $       1.86
    Diluted                        0.71       0.43         1.48         1.85
    Cash flow
    Cash provided by        $           $          $            $
    operating activities         33,435    141,522       53,244      299,333
    Additions to property,
    plant and equipment          15,327      8,432       48,723       34,358
    EBITDA
    Net Income              $    50,768 $   31,526 $    105,390 $    131,450
    Add:
              Income taxes       13,275      6,276       35,136       56,397
              Interest
              expense, net          451        762        2,503        4,672
              Investment loss
              from long-term
              investment          1,939          -        1,939            -
              Gain on
              revaluation of
              investment        (17,979)         -      (17,979)           -
              Impairment of
              intangible
              asset and
              goodwill            1,166          -        1,166            -
              Amortization of
              property, plant
              and equipment
              and intangible
              asset              14,763     15,139       55,622       61,624
    EBITDA(a)                $   64,383  $  53,703  $   183,777  $   254,143

(a) EBITDA is a non-GAAP measure calculated by adding back to net income the sum of net interest expense, taxes, depreciation/amortization of property, plant and equipment and intangible assets, and impairment of intangible assets and goodwill. EBITDA does not have a standardized meaning prescribed by GAAP and is not necessarily comparable to similar measures provided by other companies. EBITDA is used by many analysts in the oil and gas industry as one of several important analytical tools. The above is the calculation of EBITDA for the periods presented.


    Financial Position                           December 31,   December 31,
                                                         2010           2009
    Operating working capital (note 2)           $    161,296 $       84,916
    Total assets                                    1,231,182      1,185,977
    Shareholders' equity per share (Class A and  $      11.93 $        11.21
    B) (note 3)

Note 2: Operating working capital is defined as working capital minus cash and cash equivalents, current future income taxes, the current portion of long-term debt, current obligations under capital leases and working capital related to discontinued operations.

Note 3: Shareholders' equity per share is a non-GAAP measure calculated by dividing shareholders' equity by the number of Class A and Class B shares outstanding at the date of the balance sheet.

1.0 OUTLOOK

The outlook for market activity in the Company's Pipeline and Pipe Services Segment and in the Petrochemical and Industrial Segment is outlined below:

Pipeline Segment - North America

The Company expects to see modest growth in the North America region in 2011 with further strengthening in 2012 based on expected steady improvement in oil and gas well drilling and the development of a number of major projects for offshore pipelines in the Gulf of Mexico.

The outlook for offshore Gulf of Mexico pipeline activity has improved significantly with Chevron's decision to proceed with the development of the Jack and St. Malo deepwater oil fields. By securing this important $40 million project, ShawCor is well positioned to benefit from the expected growth in deepwater Gulf of Mexico oil field development in 2012 and beyond.

In contrast to the weakness experienced in 2009 and the first half of 2010, the Company has begun to see the benefit on demand for its products and services as a result of increased well drilling and completions throughout North America. This trend is expected to continue in 2011 and should be a source of revenue growth for the Company. However, with the completion in 2011 of contracted pipe coating for the TransCanada Keystone XL project, the expected improvement in small diameter volumes will be partially offset by lower large diameter project activity, at least until the next cycle of pipeline infrastructure construction is implemented to connect new and growing sources of supply to continental and international markets.

Pipeline Segment - Latin America

During the fourth quarter of 2010, the Company completed the acquisition of 100% of ShawCor's pipe coating operation in Brazil. This strategic initiative was undertaken to position ShawCor to benefit from the growth in pipeline infrastructure as Brazil's vast deepwater oil resources are developed over the next twenty years. While it will likely be beyond 2011 before the pace of development accelerates, the Company does expect to see a modest increase in volume in Brazil in 2011, both as a result of the full consolidation of the Brazil operation and based on stronger project activity, with the P55 riser program scheduled for production in the second and third quarters of the year.

Elsewhere in the Latin America region, the Company expects activity in Mexico to be consistent with 2010 while other markets in South America offer growth potential.

Pipeline Segment - EMAR

Project activity in the Europe, Middle East, Africa, Russia ("EMAR") region is expected to improve in 2011 over 2010 primarily due to the planned execution of the U.S. $93 million Total Laggan-Tormore project as well as the shift of production from the fourth quarter of 2010 to the first half of 2011 on the Ras Al Zur water pipeline project in Saudi Arabia. Beyond 2011, expansion opportunities are under evaluation for several geographic markets in the region where the Company does not currently have pipe coating facilities.

Pipeline Segment - Asia Pacific

During 2010, revenue generated from the Asia Pacific region reached a record level due to the execution of the $185.0 million PNG LNG and $40.0 million Epic Energy QSN3 projects plus a number of other projects. Production will be completed on both projects in 2011 and this activity, coupled with several large projects in South East Asia anticipated for the second half of 2011, should allow the Company's Asia Pacific region to continue to generate revenue in line with the prior year.

Petrochemical and Industrial Segment

Following the abrupt decline in activity associated with the global economic recession in late 2008 and 2009, the Petrochemical and Industrial segment's markets have shown steady improvement. The Company's operations in Europe have in particular seen significant improvement, with increased shipments to the major German automotive manufacturers. In 2011 and beyond, continued strength in the Company's European operations coupled with modest growth in North America and the continued ramp up of production in the recently established China facility should generate year over year improvement in revenue and operating income.

Order Backlog

The improvement in pipeline outlook has not yet been reflected in the Company's order backlog, representing customer orders expected to be completed within one year. The order backlog totaled $374.6 million at December 31, 2010, a level slightly below the backlog of $382.2 million at the end of the third quarter of 2010 and lower by 8.7% from the $410.5 million level at the start of the year. During the fourth quarter of 2010 and first quarter of 2011, the Company submitted firm project bids totaling in excess of $1.5 billion. These bids relate to projects in Asia Pacific, the Middle East and Northern Europe and represent an unprecedented level of bidding activity for ShawCor. Many of these projects are expected to receive customer investment approval in 2011 and, if successfully awarded to the Company, offer the potential to increase ShawCor's backlog during 2011.

2.0 RESULTS FROM OPERATIONS

2.1 Consolidated Information

Revenue

The following table sets forth revenue by reportable operating segment for the following periods:


    (in thousands of C$)  Three months ended                 Year Ended
                    December    September    December    December     December
                      31,          31,         31,         31,          31,
                     2010         2010        2009        2010         2009
    Pipeline and
    Pipe
    Services      $267,780     $253,447    $235,757    $920,157   $1,072,858
    Petrochemical
    and
    Industrial     25,878       28,921       25,601     115,783      114,935
    Elimination    (1,572)       591        (447)       (1,777)      (3,815)
    Consolidated $292,086     $282,959     $260,911  $1,034,163   $1,183,978

Fourth Quarter 2010 versus Third Quarter 2010

Consolidated revenue of $292.1 million in the fourth quarter of 2010 increased by $9.1 million, or 3% from $283.0 million for the third quarter of 2010 due to an increase in the Pipeline and Pipe Services segment, partially offset by lower revenue in the Petrochemical and Industrial segment.

Revenue for the Pipeline and Pipe Services segment was $14.3 million higher in the fourth quarter of 2010 than in the third quarter, because of higher revenue in North America and EMAR which was partially offset by lower revenue in Latin America and Asia Pacific. See section 3.1 and 3.2 - Segment information, for additional disclosure with respect to the change in revenue.

Fourth Quarter 2010 versus Fourth Quarter 2009

Consolidated revenue of $292.1 million in the fourth quarter of 2010 increased by $31.2 million, or 12%, from $260.9 million for the fourth quarter of 2009 due to strong growth in the Pipeline and Pipe Services segment.

Revenue for the Pipeline and Pipe Services segment was $32.0 million higher in the fourth quarter of 2010 than in the fourth quarter of 2009, mainly due to higher revenue in North America and EMAR which was partially offset by lower revenue in Latin America and Asia Pacific. See section 3.1 - Segment information, for additional disclosure with respect to the change in revenue in the Pipeline and Pipe Services segment.

Twelve Months ended December 31, 2010 versus Twelve Months ended December 31, 2009

Consolidated revenue decreased by $150.0 million, or 13%, from $1,184 million in 2009 to $1,034 million in 2010, due to a decrease in revenue in the Pipeline and Pipe Services segment.

Pipeline and Pipe Services revenue decreased by $152.7 million, or 14%, from $1,072.9 million in 2009 to $920.2 million in 2010. The decrease was due to the unfavourable effect of foreign exchange fluctuations combined with lower revenue in EMAR and Latin America of $76.1 million and $132.4 million, respectively, and was partially offset by an increase in revenue from North America and Asia Pacific of $18.7 million and $37.1 million, respectively. See section 3.1 - Pipeline and Pipe Services segment for additional information with respect to the changes in revenue in the Pipeline and Pipe Services segment.

Operating Income

The following table sets forth income from operations and operating margin for the following periods:


    (in thousands of C$) Three months ended                Year Ended
               December    September    December   December    December
                  31,          31,         31,        31,         31,
                  2010         2010        2009       2010        2009
    Operating
    Income     $   48,454    44,743      38,564    126,989  $  192,519
    Operating
    Margin(a)       16.6%     15.8%       14.8%      12.3%       16.3%
    (a) Operating margin is defined as income from operations divided by
    revenue.

Fourth Quarter 2010 versus Third Quarter 2010

Operating income increased by $3.8 million, or 8.4%, from $44.7 million during the third quarter of 2010 to $48.5 million during the fourth quarter of 2010, primarily due to an increase in revenue as explained above.

Fourth Quarter 2010 versus Fourth Quarter 2009

Operating income increased by $9.9 million, or 26%, from $38.6 million for the fourth quarter of 2009 to $48.5 million for the fourth quarter of 2010, mainly due to an increase in revenue as explained above and foreign exchange gains of $1.7 million recorded in the fourth quarter of 2010 compared to a foreign exchange loss of $1.3 million in the prior year.

Twelve Months ended December 31, 2010 versus Twelve Months ended December 31, 2009

Operating income decreased by $65.5 million from $192.5 million in 2009 to 127.0 million in 2010, mainly due to the reduction in revenue as explained above and a decrease in the operating margin of 3.9 percentage points. The decrease in operating margin was attributable to the Pipeline and Pipe Services segment and was due to the under absorption of fixed manufacturing overhead, a slight decline in segment contribution margin and the unfavourable effect of foreign exchange fluctuations - See section 2.2 - Foreign Exchange impact.

Income taxes

Fourth Quarter 2010 versus Third Quarter 2010

The Company recorded income tax expense of $13.3 million (20.7% of income before income taxes) in the fourth quarter of 2010, compared to income tax expense of $10.7 million (24.0% of income before income taxes) in the third quarter of 2010. The effective income tax rate in the fourth quarter was lower than the Company's expected effective income tax rate of 30.5%, mainly due to the fact that a substantial portion of the Company's taxable income in the fourth quarter of 2010 was earned in Asia Pacific and other jurisdictions where the expected tax rate is 25% or less, combined with the fact that the $18.0 million gain on revaluation of investment was not taxable.

Fourth Quarter 2010 versus Fourth Quarter 2009

The Company recorded income tax expense of $13.3 million (20.7% of income before income taxes) in the fourth quarter of 2010, compared to income tax expense of $6.3 million (16.6% of income before income taxes) in the fourth quarter of 2009. The effective income tax rate in the fourth quarter was lower than the Company's expected effective income tax rate of 30.5%, for the reasons discussed above.

Twelve Months ended December 31, 2010 versus Twelve Months ended December 31, 2009

The Company recorded income tax expense of $35.1 million (25.0% of income before income taxes) for the year ended December 31, 2010, compared to income tax expense of $56.4 million (30.0% of income before income taxes) for the year ended December 31, 2009. The effective income tax rate for the year ended December 31, 2010 was lower than the Company's expected effective income tax rate of 30.5%, due to a significant portion of the Company's taxable income being earned in Asia Pacific and other jurisdictions where the expected tax rate is 25% or less, combined with the fact that the $18.0 million gain on revaluation of investment was not taxable.

Net Income

Fourth Quarter 2010 versus Third Quarter 2010

Net income increased by $17.1 million, or 51.0% from $33.7 million in the third quarter to $50.8 million in the fourth quarter of 2010. The increase was primarily driven by the increased income from operations as discussed above, the gain on revaluation of investment of $18.0 million, and the lower tax rate recorded in the fourth quarter of 2010.

Fourth Quarter 2010 versus Fourth Quarter 2009

Net income increased by $19.3 million, or 61%, from $31.5 million in the fourth quarter of 2009 to $50.8 million in the fourth quarter of 2010. The increase was primarily driven by the increased income from operations as discussed above, the gain on revaluation of investment of $18.0 million and the lower tax rate recorded in the fourth quarter of 2010.

Twelve Months ended December 31, 2010 versus Twelve Months ended December 31, 2009

Net income decreased by $26.1 million, or 20.0%, from $131.5 million in 2009 to $105.4 million in 2010. The decrease was primarily due to the decrease in revenue and income from operations as explained above and was partially offset by a gain on revaluation of investment of $18.0 million and a 5.0 percentage point reduction in the effective income tax rate from 30.0% in 2009 to 25.0% in 2010.

2.2 Foreign Exchange Impact

The following table sets forth the significant currencies in which the Company operates and the average foreign exchange rates for these currencies versus Canadian dollars, for the following periods:


                      Three Months Ended          Year Ended
                         December 31,            December 31,
                           2010         2009    2010        2009
    U.S. dollar          1.0157       1.0544  1.0351      1.1450
    Euro                 1.3797       1.5569  1.3785      1.5958
    British Pounds       1.5935       1.7154  1.5987      1.7763

    The following table sets forth the impact on revenue, income from
operations and net income, compared with the prior year period, as a result
of foreign exchange fluctuations on the translation of foreign currency
operations:


                                Three months       Year ended
              (in                  ended        December 31, 2010
              thousands of      December 31,
              C$)                   2010
    Revenue                   $     (10,427)  $          (77,776)
    Income from                      (1,138)             (18,536)
    operations
    Net income                         (986)             (12,706)


    3.0 SEGMENT INFORMATION
    3.1 Pipeline and Pipe Services segment

The following table sets forth, by geographic location, the revenue, income from operations ("Operating Income") and operating margin for the Pipeline and Pipe Services segment for the following periods:


    (in                   Three months ended                  Years ended
    thousands
    of C$)
                December 31,    September    December   December     December
                     2010          30,         31,        31,          31,
                                  2010        2009       2010         2009
    North      $   116,969  $   113,590  $   84,846 $  412,622  $   393,926
    America
    Latin           17,647       19,730      29,209     56,400      188,758
    America
    EMAR            65,058       39,204      50,340    184,768      260,861
    Asia            68,105       80,923      71,364    266,366      229,314
    Pacific
    Total      $   267,780  $   253,447  $  235,759 $  920,157  $ 1,072,859
    Revenue

    Operating  $    45,612  $    43,712  $   43,819 $  133,617  $   213,123
    Income
    Operating         17.0%        17.2%       18.6%      14.5%        19.9%
    Margin

Fourth Quarter 2010 versus Third Quarter 2010

Revenue in the fourth quarter of 2010 was $267.8 million, an increase of $14.4 million, or 6%, over the third quarter of 2010, with a significant improvement in the EMAR region offsetting a reduction in Asia Pacific:

    - In North America, revenue increased by $3.4 million, or 3%, due to
    increased volumes of small diameter pipe coating, flexible composite pipe
    and drill pipe inspection volumes from the general improvement in well
    completion activity throughout North America.

    - Revenue in Latin America declined by $2.1 million as a result of lower
    volumes in Mexico following the third quarter completion of several
    offshore concrete weight coating projects.

    - EMAR revenue increased by a substantial $25.9 million, or 66%, as a
    result of the launch of full production at the Leith, Scotland facility
    for the Statoil P12, Total Laggan, and Chevron Congo River Crossing
    projects as well as increased offshore weld inspection volumes.

    - In Asia Pacific, revenue experienced a temporary decrease of $12.8
    million, or 16%, as a result of the completion in the third quarter of
    the PNG LNG onshore pipe coating at the Kabil facility combined with
    lower production on the PNG LNG offshore pipe coating at the Kuantan,
    Malaysia facility due to reductions in pipe availability.

Operating Income in the fourth quarter of 2010 was $45.6 million compared to $43.7 million in the third quarter of 2010, an increase of $1.9 million, or 4%. The increase was primarily due to the increase in revenue explained above and in particular the impact of revenue on facility utilization in Leith, Scotland. Operating margins declined slightly as the improvement in the absorption of the fixed manufacturing overhead was offset by the change in project mix from Asia Pacific to EMAR.

Fourth Quarter 2010 versus Fourth Quarter 2009

Revenue in the fourth quarter of 2010 increased by $32.0 million, or 14%, from $235.8 million in the fourth quarter of 2009 with strong growth in North America and EMAR offsetting weakness in Latin America and Asia Pacific:

    - In North America, revenue increased by $32.1 million, or 38%, as a
    result of stronger small diameter pipe coating and spoolable composite
    pipe volumes in Canada, combined with an increase in large diameter
    pipe project activity that benefited pipe coating and weld inspection
    volumes in Canada and the USA.

    - The $11.6 million decrease in revenue in Latin America was due to the
    completion in 2009 of the Trinidad North East Offshore and Tobago
    Pipelines project as well as lower project activity in Mexico, partially
    offset by the additional revenue contributed by the Company's
    acquisition of 100% of its operations in Brazil in October 2010.

    - Revenue in EMAR increased by $14.7 million, or 29%, due to the
    attainment of full production at the Leith, Scotland facility from the
    Statoil P12, Total Laggan and Chevron Congo River Crossing projects plus
    increased pipeline weld inspection activity.

    - In Asia Pacific, revenue decreased by $3.3 million, or 5%, due to low
    production activity at the Kabil, Indonesia facility which completed the
    PNG LNG onshore pipe coating project in September and had low utilization
    in November and December. This weakness offset the growth in volumes
    from the PNG LNG offshore project at the Kuantan, Malaysia facility and
    the Epic Energy QSN3 project in Kembla Grange, Australia.

Operating Income in the fourth quarter of 2010 of $45.6 million increased by $1.8 million, or 4%, from the $43.8 million reported in the fourth quarter of 2009. The increase was due to the higher revenue explained above partially offset by a reduction in the operating margin of 1.6 percentage points. The decrease in operating margin was due to a reduction in contribution margins caused by the change in project mix from Asia Pacific to the EMAR and North America regions.

Year ended December 31, 2010 versus 2009

Revenue in the Pipeline and Pipe Services segment for the year ended December 31, 2010 was $920.2 million, a decrease of $152.7 million, or 14%, from the prior year. The decrease was due to the unfavourable impact of foreign exchange fluctuations on the translation of foreign currency operations (See section 2.2 - Foreign Exchange Impact) combined with lower project activity in Latin America, and EMAR, partially offset by increased project volumes in Asia Pacific and a modest improvement in volumes related to North American well completions:

    - The increase in revenue in North America of $18.7 million was primarily
    due to a pick up in drilling and well completions in Canada and the U.S.
    in the second half of 2010 compared with the prior year, which benefited
    several of the Company's key product markets including small diameter
    pipe coating, spoolable composite pipe and drill pipe inspection
    services.

    - A decrease in revenue in Latin America of $132.4 million was due to the
    Trinidad North East Offshore and Tobago Pipelines project that had
    generated revenue in 2009 of US$81 million and for which production was
    completed in the fourth quarter of 2009. Also negatively impacting
    revenue were reductions in pipe coating project activity of 51% in
    Mexico and 17% in Brazil. The decline in project activity in Brazil
    continued in the fourth quarter but was offset by the Company's
    acquisition of 100% of its Brazil operation with the result that the
    Company's reported revenue from Brazil increased by 27%.

    - The decrease in EMAR revenue of $76.1 million was mainly due to the
    unfavourable effect of foreign exchange fluctuations combined with lower
    pipe coating volumes at the Company's flow assurance insulation coating
    facility in Orkanger, Norway, a significant decline in joint protection
    product shipments, field joint and custom coating project activity and
    offshore pipeline weld inspection. Each of these markets were impacted
    by the deferral of client commitments for new pipeline infrastructure
    that had occurred in 2009 in response to the global economic downturn.

    - In Asia Pacific, revenue increased by $37.1 million as a result of
    growth in the second half of 2010 associated with the launch of
    production on the Epic Energy QSN3 project in Kembla Grange, Australia
    and the PNG LNG pipeline project at Kabil, Indonesia and Kuantan,
    Malaysia.

Operating Income in the Pipeline and Pipe Services segment for the year ended December 31, 2010 was $133.6 million, a decrease of $79.5 million, or 37%, from $213.1 million in 2009. The operating margin decreased by 5.4 percentage points from 19.9% in 2009 to 14.5% in 2010. Key factors in the decline in the operating margin were:

    - The reduction in absorption of fixed overhead costs as a result of the
    14% reduction in segment revenue, impacted operating margins negatively
    by 3.4 percentage points.

    - A reduction in segment contribution margins due primarily to changes in
    project activity in North America and Latin America that reduced
    operating margin by approximately 1 percentage point.

    - The unfavourable effect of foreign exchange fluctuations reduced the
    segment operating margin by just under 1 percentage point.

    3.2 Petrochemical and Industrial segment

The following table sets forth, by geographic location, the revenue, Operating Income and operating margin for the Petrochemical and Industrial segment for the following periods:


    (in                    Three months ended                 Years ended
    thousands
    of C$)
                 December 31,    September    December   December    December
                      2010          30,         31,        31,         31,
                                   2010        2009       2010        2009
    North       $    13,279  $    16,819  $   12,775 $   64,053  $   69,719
    America
    EMAR             12,040       11,575      12,378     50,002      45,216
    Asia                559          527           -      1,728           -
    Pacific
    Total       $    25,878  $    28,921  $   25,153 $  115,783  $  114,935
    Revenue

    Operating   $     3,452  $     2,832  $      437 $   13,159  $    5,062
    Income
    Operating          13.3%         9.8%        1.7%      11.4%        4.4%
    Margin

Fourth Quarter 2010 versus Third Quarter 2010

In the Petrochemical and Industrial segment, revenue in the fourth quarter of 2010 totaled $25.9 million compared to $28.9 million in the third quarter of 2010, a decrease of $3.0 million, or 12%. The decrease was attributable to reduced shipments of wire and cable products.

Operating Income in the fourth quarter of 2010 was $3.5 million compared to $2.8 million in the third quarter of 2010, an increase of $0.7 million, or 25%. The increase in operating income, despite the revenue reduction, resulted from a gain in the operating margin of 3.5 percentage points to 13.3%, with an improvement in segment contribution margins combined with a modest reduction in fixed overhead costs.

Fourth Quarter 2010 versus Fourth Quarter 2009

Revenue in the Petrochemical and Industrial segment in the fourth quarter of 2010 at $25.9 million increased by $0.7 million, or 3%, from the fourth quarter of 2009 as the Company experienced a significant improvement in product shipments in EMAR which was partially offset by the year over year weakening of the Euro versus the Canadian dollar and the resulting effect on the translation of the EMAR operating results.

Operating Income in the fourth quarter of 2010 was $3.5 million compared to $0.4 million in the fourth quarter of 2009, an increase of $3.1 million. The increase in operating income was due to improved contribution margins in heat shrink products and a $2.0 million reduction in fixed overhead costs and one time restructuring costs that had been incurred in 2009 at the segment's EMAR operations.

Year ended December 31, 2010 versus 2009

Revenue in the Petrochemical and Industrial segment for the year ended December 31, 2010 was $115.8 million, basically unchanged from 2009, as increased heat shrink sleeve product shipments resulting from a strengthening in industrial and automotive markets in North America and EMAR were largely offset by a weakening of demand for the segment's wire and cable products and the impact on the translation of the EMAR operations, due to the weakening of the Euro versus the Canadian dollar (See section 2.2 - Foreign Exchange Impact).

Operating Income in the Petrochemical and Industrial segment for the year ended December 31, 2010 was $13.2 million, an increase of $8.1 million, or 159%, from $5.1 million in 2009. The operating margin improved by 7.0 percentage points due to the following factors:

    - Improved contribution margins in heat shrink products were partially
    offset by foreign exchange impacts and weaker margins in wire and cable
    products, with a net benefit to operating margins of 2.9 percentage
    points.

    - A reduction in fixed overhead costs and the elimination of one time
    restructuring costs that had been incurred in 2009 related to
    restructuring at DSG-Canusa's European operations that improved
    operating margins by 4.1 percentage points on a year over year basis.

    3.3 Financial and Corporate

Financial and corporate costs include corporate expenses not allocated to the operating segments and other non-operating items including foreign exchange gains and losses on foreign currency denominated cash and working capital balances. The corporate division of the Company only earns revenue that is considered incidental to the activities of the Company. As a result, it does not meet the definition of a reportable operating segment as defined under GAAP.

The following table sets forth the Company's unallocated financial and corporate expenses, before foreign exchange gains and losses, for the following periods:


    (in thousands of C$)  Three months ended       Years ended
               December  September  December  December  December
                  31         30        31        31         31
                2010        2010      2009      2010       2009
    Financial
    and corporate
    expense $    2,150  $   6,497  $  4,409 $  25,323  $  21,876

Fourth Quarter 2010 versus Third Quarter 2010

Financial and corporate costs decreased by $4.3 million from the third quarter of 2010 primarily due to lower management incentive compensation and a reduction in professional fees related to corporate development in the fourth quarter of 2010 compared to the third quarter of 2010.

Fourth Quarter 2010 versus Fourth Quarter 2009

Financial and corporate costs decreased by $2.3 million from $4.4 million during the fourth quarter of 2009 to $2.2 million during the fourth quarter of 2010 due to lower expenses related to management incentive compensation plans.

Twelve Months ended December 31, 2010 versus Twelve Months ended December 31, 2009

Financial and corporate expense, before foreign exchange gains and losses, increased by $3.4 million, or 15.8%, in 2010 compared to 2009, mainly due to an increase in professional fees relating to corporate development activities, higher employee benefit costs and expenses related to the introduction of new management incentive compensation plans.

4.0 Forward-Looking Information

This document includes certain statements that reflect management's expectations and objectives for Company's future performance, opportunities and growth, which statements constitute forward-looking information under applicable securities laws. Such statements, other than statements of historical fact, are predictive in nature or depend on future events or conditions. Forward-looking information involves estimates, assumptions, judgments and uncertainties. These statements may be identified by the use of forward-looking terminology such as "may", "will", "should", "anticipate", "expect", "believe", "predict", "estimate", "continue", "intend", "plan" and variations of these words or other similar expressions. Specifically, this document includes forward-looking information in respect of, among other things, the impact of global economic activity on the demand for the Company's products as well as the prices of commodities used by the Company, the impact of changing energy demand, supply and prices, the impact of changes in competitive conditions in the markets in which the Company participates, the impact of changing laws for environmental compliance on the Company's capital and operating costs, and the adequacy of the Company's existing accruals in respect thereof, the Company's relationships with its employees, the continued establishment of international operations, the effect of continued development in emerging economies, as well as the Company's plans as they relate to research and development activities and the maintenance of its current dividend policies, the outlook for revenue and operating income and the expected development in the Company's order backlog.

Forward-looking information involves known and unknown risks and uncertainties that could cause actual results to differ materially from those predicted by the forward-looking information. We caution readers not to place undue reliance on forward looking information as a number of factors could cause actual events, results and prospects to differ materially from those expressed in or implied by the forward looking information. Significant risks facing the Company include, but are not limited to: changes in global economic activity and changes in energy supply and demand which impact on the level of drilling activity and pipeline construction; exposure to product and other liability claims; compliance with environmental, trade and other laws; political, economic and other risks arising from the Company's international operations; fluctuations in foreign exchange rates, as well as other risks and uncertainties, as more fully described herein under the heading "Risks and Uncertainties".

These statements of forward-looking information are based on assumptions, estimates and analysis made by management in light of its experience and perception of trends, current conditions and expected developments as well as other factors believed to be reasonable and relevant in the circumstances. These assumptions include assumptions in respect of the potential for improvement in demand for the Company's products and services as a result of continued global economic recovery, the potential for increased investment in global energy infrastructure as a result of stabilization of capital markets, the Company's ability to execute projects under contract, the continued supply of and stable pricing for commodities used by the Company and the availability of personnel resources sufficient for the Company to operate its businesses. The Company believes that the expectations reflected in the forward-looking information are based on reasonable assumptions in light of currently available information. However, should one or more risks materialize or should any assumptions prove incorrect, then actual results could vary materially from those expressed or implied in the forward-looking information included in this document and the Company can give no assurance that such expectations will be achieved.

When considering the forward looking information in making decisions with respect to the Company, readers should carefully consider the foregoing factors and other uncertainties and potential events. ShawCor Ltd. does not assume the obligation to revise or update forward looking information after the date of this document, or to revise it to reflect the occurrence of future unanticipated events, except as may be required under applicable securities laws.

Other information relating to the Company, including its Annual Information Form, is available on SEDAR at www.sedar.com.

ShawCor Ltd. will be hosting a Shareholder and Analyst conference call and Webcast on Friday, March 4, 2011 at 10:00 am EST to discuss the company's fourth quarter 2010 financial results. Please visit our website at http://www.shawcor.com for future details.

    March 3, 2011
    SHAWCOR LTD.
    CONSOLIDATED BALANCE SHEETS (UNAUDITED)
    (in thousands of Canadian dollars)


                                                  December 31,   December 31,
    As at                                                 2010           2009
    Assets
    Current assets
    Cash and cash equivalents                   $      155,998 $      249,988
    Accounts receivable                                243,955        191,821
    Taxes receivable                                    13,823         14,055
    Inventories                                        126,132        109,379
    Prepaid expenses                                    14,171         14,392
    Derivative financial instruments                     1,130          1,782
    Current future income taxes                          4,590          4,668
                                                       559,799        586,085
    Property, plant and equipment, net                 283,286        270,219
    Intangible assets                                   91,353         62,784
    Future income taxes                                 29,035         36,249
    Derivative financial instruments                         -             39
    Long-term investments                               31,995             24
    Other assets                                        15,622         16,128
    Goodwill                                           220,092        214,449
    TOTAL ASSETS                                $    1,231,182 $    1,185,977

    Liabilities
    Current liabilities
    Accounts payable and accrued liabilities    $      131,777 $      127,932
    Taxes payable                                       50,860         42,971
    Loan payable                                         5,126              -
    Deferred revenue                                    54,751         75,100
    Derivative financial instruments                       527            510
    Current portion of long-term debt                   25,005         26,235
    Current obligations under capital lease                345            371
                                                       268,391        273,119
    Long-term debt                                           -         26,052
    Obligations under capital lease                        339            492
    Future income taxes                                 78,516         76,552
    Derivative financial instruments                       807              -
    Other non-current liabilities                       40,378         19,340
    TOTAL LIABILITIES                                  388,431        395,555

    Shareholders' Equity
    Capital stock                                      206,775        204,151
    Contributed surplus                                 18,144         17,277
    Retained earnings                                  780,722        695,800
    Accumulated other comprehensive loss             (162,890)      (126,806)
    TOTAL SHAREHOLDERS' EQUITY                         842,751        790,422
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $    1,231,182 $    1,185,977

    SHAWCOR LTD.
    CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
    (in thousands of Canadian dollars, except per share amounts)


                               Three Months Ended           Year Ended
                                  December 31,             December 31,
                                2010           2009        2010          2009
    Revenue                $ 292,086      $ 260,911 $ 1,034,163   $ 1,183,978
    Cost of goods sold       176,293        154,183     623,641       695,521
    Gross profit             115,793        106,728     410,522       488,457

    Selling, general and      50,371         48,638     221,440       219,557
    administrative
    expenses
    Research and               2,788          3,103      11,050        10,967
    development expenses
    Foreign exchange         (1,749)          1,284     (5,745)         3,790
    (gains) losses
    Amortization of           12,805         14,044      50,376        57,244
    property, plant and
    equipment
    Amortization of            1,958          1,095       5,246         4,380
    intangible assets
    Impairment of                958              -         958             -
    intangible assets
    Impairment of                208              -         208             -
    goodwill
    Income from               48,454         38,564     126,989       192,519
    operations
    Gain on revaluation       17,979              -      17,979             -
    of investment
    Investment loss on       (1,939)              -     (1,939)             -
    long-term investment
    Interest income on           506            409       1,455           916
    short-term deposits
    Interest expense,          (525)          (437)     (1,631)       (1,780)
    other
    Interest expense on        (432)          (734)     (2,327)       (3,808)
    long-term debt
    Income before income      64,043         37,802     140,526       187,847
    taxes
    Income taxes              13,275          6,276      35,136        56,397
    Net income for the     $  50,768      $  31,526 $   105,390   $   131,450
    year

    Earnings per share
                Basic      $    0.72      $    0.44 $      1.49   $      1.86
                Diluted         0.71           0.43        1.48          1.85

    SHAWCOR LTD.
    CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (UNAUDITED)
    (in thousands of Canadian dollars)


                           Three Months Ended          Year ended
                              December 31,            December 31,
                            2010           2009       2010         2009
    Balance, beginning $ 735,161      $ 669,126 $  695,800   $  601,407
    of period
    Net income for the    50,768         31,526    105,390      131,450
    period
                         785,929        700,652    801,190      732,857
    Dividends declared   (5,207)        (4,852)   (20,468)     (37,057)
    Balance, end of    $ 780,722      $ 695,800 $  780,722   $  695,800
    period


    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
    (in thousands of Canadian dollars)

                                   Three Months Ended           Year ended
                                      December 31,             December 31,
                                     2010      2009       2010         2009
    Net income for the period  $ 50,768   $  31,526 $  105,390   $  131,450

    Other comprehensive loss,
    net of income taxes:
            Unrealized loss on
            translating
            financial
            statements of
            self sustaining
            foreign operations   (24,833)    (7,775)   (37,289)     (49,149)
            Gain on
            translating
            financial
            statements of
            self-sustaining
            foreign operations
            transferred to net
            income in the
            period                    -           -          -          678
            Gain on hedges of       812       1,480      1,423        8,428
            unrealized foreign
            currency
            translation
            Income tax expense      221        (34)       (218)      (1,223)
    Unrealized foreign
    currency translation
    loss, net of hedging
    activities                  (23,800)    (6,329)    (36,084)     (41,266)
            Unrealized loss on        -          -           -         (336)
            available for sale
            financial asset
            Unrealized gain on
            available-for-sale
            financial asset
            transferred to net
            income                    -          -          -          336
    Other comprehensive loss    (23,800)    (6,329)   (36,084)     (41,266)
    for the period
    Comprehensive income for   $ 26,968  $  25,197 $   69,306   $   90,184
    the period


    SHAWCOR LTD.
    CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
    (in thousands of Canadian dollars)

                                  Three Months Ended            Year ended
                                     December 31,              December 31,
                                  2010        2009        2010         2009
    Operating activities
    Net income for the year   $  50,768   $  31,526 $   105,390   $131,450
    Add (deduct) items not            -           -
    affecting cash:
           Amortization of       12,805      14,044      50,376     57,244
           property, plant
           and equipment
           Amortization of        1,958       1,095       5,246      4,380
           intangible assets
           Amortization of          426         111           -        444
           transaction costs
           Amortization of         (34)       1,173           4      1,173
           long-term prepaid
           expenses
           Asset retirement       1,605      (6,885)         269    (4,852)
           obligations
           expense
           Stock-based             (269)        771       1,478      3,165
           compensation
           Future income          2,326      (3,482)     (5,532)    (3,809)
           taxes
           Loss (gain) on          (341)          4     (1,226)      1,365
           disposal of
           property, plant
           and equipment
           Loss on derivative       708           -         708          -
           financial
           instruments
           Gain on short-term         -           -
           investments
           Accounting gain on   (17,979)          -    (17,979)          -
           acquisition
           Investment loss on     1,939           -       1,939          -
           long-term
           significant
           influence
           investment
           Impairment of              -           -           -        336
           available-for-sale
           financial asset
           Impairment of            958           -         958          -
           intangible assets
           Impairment of            208           -         208          -
           goodwill
    Settlement of asset          (2,493)         937     (3,218)    (1,307)
    retirement obligations
    Change in employee           (1,993)      (3,544)       (275)      (457)
    future benefits
    Change in non-cash          (17,157)     105,772    (85,102)    110,201
    working capital and
    foreign exchange
    Cash provided by             33,435      141,522      53,244    299,333
    operating activities

    Investing activities
           Purchases of         (15,327)      (8,432)    (48,723)   (34,358)
           property, plant
           and equipment
           Proceeds on                -          562       3,420        606
           disposal of
           property, plant
           and equipment
           Purchase of             (302)           -       (302)          -
           intangible assets
           Acquisition of        (3,578)           -    (34,917)          -
           long-term
           investment
           Acquisition of       (19,728)      (3,943)    (19,728)         -
           subsidiaries
           Increase                  (6)       4,068           -     (3,943)
           (decrease) in
           long-term notes
           receivable
    Cash used in investing      (38,941)      (7,745)   (100,250)   (37,695)
    activities

    Financing activities
           Decrease in bank           -            -           -    (15,418)
           indebtedness
           Proceeds from loan       (75)        (107)       5,126         -
           Repayments on              -            -       (179)       (107)
           capital leases
           Repayment of             947          378    (26,043)    (28,705)
           long-term debt
           Issuance of shares         -            -       2,013      1,679
           Dividends paid to     (5,207)      (4,852)    (20,468)   (37,057)
           shareholders
    Cash used in financing       (4,335)      (4,581)    (39,551)   (79,608)
    activities

    Foreign exchange (loss)      (5,861)      (2,579)     (7,433)   (10,974)
    on foreign cash and cash
    equivalents

    Net change in cash and      (15,702)     126,617    (93,990)    171,056
    cash equivalents for the
    year

    Cash and cash               171,700      123,371     249,988     78,932
    equivalents, beginning
    of year
    Cash and cash             $ 155,998    $ 249,988 $   155,998   $249,988
    equivalents, end of year

    For further information:

    Gary Love
    Vice President, Finance and CFO
    Telephone:                      +1-416-744-5818
    e-mail:                         glove@shawcor.com
    website:                        http://www.shawcor.com

SOURCE ShawCor Ltd.