IR presentation
 
 

 


Exco Technologies Limited Announces Results for Third Quarter Ended June 30, 2017


  • Sales of $145.9 million and EBITDA of $20.7 million
  • EPS of $0.26 compared to $0.30 adjusted in the prior year
  • Quarterly dividend of $0.08 per share declared
  • Free cash flow of $14.3 million; net debt down to $14.0 million

TORONTO, Aug. 3, 2017 /CNW/ - Exco Technologies Limited (TSX-XTC) today announced results for its third quarter ended June 30, 2017. In addition, the Company announced the quarterly dividend of $0.08 per common share which will be paid on Sept 29, 2017 to shareholders of record on Sept 15, 2017.  The dividend is an "eligible dividend" in accordance with the Income Tax Act of Canada.

Three Months ended
June 30
Nine Months ended
June 30
(in $ thousands except per share amounts)
2017 2016 2017 2016
Sales $145,909 $161,671 $452,789 $425,955
EBITDA1 $20,650 $23,265 $67,391 $61,174
Net income for the period
Reported $10,933 $16,226 $34,998 $37,043
Adjusted to exclude certain one-time items $10,933 $12,786 $36,221 $33,603
Earnings per share from net income
Basic and Diluted – Reported $0.26 $0.38 $0.82 $0.87
Adjusted to exclude certain one-time items $0.26 $0.30 $0.85 $0.79

"Exco's revenue, EBITDA and cash flow remain relatively strong despite being somewhat softer than we anticipated in the quarter", said Brian Robbins, Exco's President and CEO. "We nonetheless believe we are well positioned to achieve gains in the quarters ahead".

Consolidated sales for the third quarter ended March 31, 2017 were $145.9 million compared to $161.7 million in the same quarter last year – a decrease of $15.8 million or 10%, which was primarily attributable to expected declines in the Automotive Solutions segment. Year-to-date sales were $452.8 million compared to $426.0 million last year – an increase of $26.8 million or 6%.

The Automotive Solutions segment reported sales of $99.4 million in the third quarter – a decrease of $15.6 million or 14% from the same quarter last year. Year-to-date, the segment reported sales of $313.9 million – an increase of $34.9 million or 12% over last year. Segment sales continued to be impacted in the quarter by management's efforts to focus on higher margin activities. To that end, sales were lower at ALC by 41% during the quarter and 30% year-to-date compared to the prior year periods driven primarily by the permanent closure of the group's loss-making Lesotho operations at the end of November 2016 and the run out of the BMW 5 Series seat cover program, which ended in February 2017. Sales were higher at Polytech, Polydesign and Neocon on a combined basis by 16% both during the quarter and year-to-date periods. AFX's sales were down 16% during the quarter mainly reflecting fewer releases associated with established programs and a slower than anticipated ramp up of new programs. AFX was acquired on April 4, 2016. Bidding activity, contract wins and the pursuit of new opportunities during the quarter remained at robust levels in each of the segment's five business units.

The Casting and Extrusion segment reported sales of $46.5 million for the third quarter – essentially unchanged from the prior year quarter. Year-to-date, the segment reported sales of $138.9 million – a decrease of $8.0 million or 5% compared to last year. Within the segment, sales were down in both the Large Mould and Castool groups during the quarter and year-to-date periods compared to the prior year. In the case of the Large Mould group this primarily reflects ongoing pricing pressures, reduced demand for spare parts and the timing of customer releases although the magnitude of these factors continued to decrease relative to prior periods. Castool's sales were down modestly over prior periods primarily due to reduced equipment sales while the Extrusion group recorded higher sales during both the quarter and year-to-date periods from broad strength, with stronger results achieved in most of the company's five extrusion plants.

Consolidated net income for the third quarter was $10.9 million or basic and diluted earnings of $0.26 per share. This compared to $12.8 million or $0.30 per share in the same quarter last year excluding a $3.4 million one-time commercial settlement gain ($0.08 per share) – a decrease in adjusted net income of 14%. Year-to-date, consolidated net income was $36.2 million or $0.85 per basic share excluding a $1.2 million closure charge associated with ALC's operations in South Africa and Lesotho ($0.03 per share). This compared to $33.6 million or $0.79 per basic share last year, again excluding the $3.4 million settlement gain – an increase in adjusted net income of 8%.

The Automotive Solutions segment reported pretax profit of $12.6 million in the third quarter – a decrease of $0.8 million or 6% compared to the same quarter last year. Year-to-date, the segment reported pretax profit of $42.2 million compared to $33.6 million – an increase of $8.6 million or 26%. The decrease in segment profitability during the quarter was primarily driven by reduced contributions from AFX but also reflected front-end inefficiencies associated with the ramp up of a number of new large programs, particularly at Polydesign in Morocco. As well, the financial results of ALC's Bulgarian operations were negatively impacted in the current quarter and year-to-date periods by the continued repositioning of the business to accommodate the ramp up of the steering wheel wrapping and Audi seat cover programs as well as the runout of the BMW 5 series seat cover program. These factors were partially offset by stronger results from the segment's other businesses on a combined basis, aided by the elimination of operating losses at ALC's operations in South Africa and Lesotho. Higher profit year-to-date was driven primarily from the inclusion of AFX's results after its acquisition on April 4, 2016 however organic profit improvement at the segment's other operations also contributed strongly. As indicated above, management remains focused on higher margin activities within the segment. Consequently, the segment pretax profit margin improved to 12.7% in the quarter from 11.7% the prior year while the profit margin strengthened to 13.5% compared to 12.0% on a year-to-date basis.

The Casting and Extrusion segment reported pretax profit of $4.8 million in the third quarter – a decrease of $0.9 million or 15% from the same quarter last year. Year-to-date, the segment reported pretax profit of $15.2 million or 27% below the prior year. Within the Large Mould segment, profitability in the quarter and year-to-date periods was impacted by pricing pressures and lower absorption rates of overhead associated with reduced demand for spare parts. As well, results continued to be negatively impacted by the initial inefficiencies associated with the implementation of new equipment/processes that management expects will further enhance the company`s competitiveness. Front end inefficiencies are compounded by the need to continue with the running of older equipment/processes for some time, resulting in the duplication of certain operating costs. Management expects these costs will begin to recede over the coming quarters. Within the Castool group, profitability was lower during both the quarter and year-to-date compared to prior year periods driven by reduced demand for certain capital equipment and higher sales/ marketing costs. Profitability within the Extrusion group was higher in the current quarter and year-to-date periods compared to the prior year. Stronger results within the group were driven by higher sales and achieved despite ongoing disruption from the harmonization of manufacturing processes at the group's various plants, which management expects will lead to further improvement in results over time.

Corporate segment expenses totaled $1.9 million in the third quarter compared to $0.5 million the prior year quarter. The prior year period benefited from $0.8 million of accrual reversals as well as lower than normal share based compensation, which fluctuates with Exco's share price at quarter end. Year-to-date, corporate segment expenses totaled $5.5 million compared to $5.6 million the prior year. Prior year-to-date expenses included approximately $1.0 million of transaction costs associated with the acquisition of AFX.
Consolidated EBITDA for the third quarter totaled $20.7 million compared to $23.3 million in the same quarter last year – a decrease of 11%. The consolidated EBITDA margin weakened slightly to 14.2% during the quarter from 14.4% the prior year period as the Casting and Extrusion segment margin fell to 17.4% from 18.7% the prior year and corporate expenses were normalized higher year over year, mostly offset by an improvement in the Automotive Solution segment margin, which increased to 14.6% from 13.1% the prior year. Year-to-date, consolidated EBITDA totaled $67.4 million compared to $61.2 million – an increase of 10%. Year-to-date, the consolidated EBITDA margin improved to 14.9% compared to 14.4% the prior year period.

Operating cash flow before net change in non-cash working capital decreased to $15.5 million in the current quarter compared to $21.3 million the prior year. The decrease was mostly driven by the lower net income which included the $3.4 million one-time cash settlement in the prior year. Year-to-date, operating cash flow before net change in non-cash working capital increased to $52.9 million from $50.6 million the prior year period. The increase occurred despite lower net income which was reduced by non-cash items such as higher depreciation and amortization expense associated with AFX, an increase in depreciation expense generally, and $0.7 million of non-cash costs associated with the plant closure in Lesotho. Non-cash working capital provided $3.2 million of cash in the current quarter and consumed $0.3 million of cash year-to-date compared to a use of $8.8 million and $8.9 million in the respective prior year periods. Consequently, net cash provided by operating activities amounted to $18.7 million in the current quarter and $52.5 million year-to-date compared to $12.5 million and $41.8 million the same periods last year.

Cash used in investing activities totaled $4.2 million and $11.3 million in the third quarter and year-to-date periods compared to $83.8 million and $99.6 million in the same respective periods last year. The difference in the quarter and year-to-date periods is largely due to the acquisition of AFX in the prior year but also due to lower spending on machinery and equipment, which in turn is attributable to both timing differences and a lower level of planned capital spending in fiscal 2017 relative to fiscal 2016.

Free cash flow for the quarter and year-to-date periods totaled $14.3 million and $40.2 million, which was ample to fund the company's common dividend ($3.4 million in the quarter and $9.8 million year-to-date) with most of the balance directed towards debt reduction.

The Company's financial position and liquidity remain very strong. Exco's net debt totaled $14.0 million as at June 30, 2017, down from $44.6 million at September 30, 2016 and approximately $71.0 million when AFX was acquired on April 4, 2016. As a result, during July 2017 the Company elected to reduce its committed credit facility from $100.0 million to $50.0 million as a cost savings measure. Exco's principal sources of liquidity include generated free cash flow, $29.7 million of balance sheet cash, and $28.0 million of unused availability under its $50.0 million committed credit facility, which matures February 2019.

For further information and prior year comparison please refer to the Company's Third Quarter Condensed Financial Statements in the Investor Relations section posted at www.excocorp.com.  Alternatively, please refer to www.sedar.com.

1 Non-IFRS Measures: In this News Release, reference may be made to EBITDA, EBITDA Margin, adjusted EPS and free cash flow which are not measures of financial performance under International Financial Reporting Standards ("IFRS"). Exco calculates EBITDA as earnings before other income/expense, interest, taxes, depreciation and amortization and EBITDA Margin as EBITDA divided by sales. Exco calculates adjusted EPS as earnings before other income/expense and free cash flow as cash provided by operating activities less interest paid less investment in fixed assets net of proceeds of disposal. EBITDA, EBITDA Margin, adjusted EPS and free cash flow are used by management, from time to time, to facilitate period-to-period operating comparisons and we believe some investors and analysts use these measures as well when evaluating Exco's financial performance. These measures, as calculated by Exco, do not have any standardized meaning prescribed by IFRS and are not necessarily comparable to similar measures presented by other issuers.

Quarterly Conference Call:
To access the live audio webcast, please log on to www.excocorp.com or https://event.on24.com/eventRegistration/EventLobbyServlet?target=registration.jsp&eventid=
1463349&sessionid=1&key=C14FDC2CC8D66FC958A05324104D3CA4&sourcepage=register
a few minutes before the event.  Real Player is required for access.  For those unable to participate on August 4, 2017, an archived version will be available on the Exco website.

About Exco Technologies Limited:
Exco Technologies Limited is a global supplier of innovative technologies servicing the die-cast, extrusion and automotive industries.  Through our 17 strategic locations in 8 countries, we employ 6,517 people and service a diverse and broad customer base.

Notice To Reader:  Forward Looking Statements
Information in this document relating to projected growth and financial performance of the Company's business units, contribution of our start-up business units, contribution of awarded programs yet to be launched, margin performance, financial performance of acquisitions and operating efficiencies are forward-looking statements.

This press release may contain forward-looking information and forward-looking statements within the meaning of applicable securities laws. We use words such as "anticipate", "plan", "may", "will", "should", "expect", "believe", "estimate" and similar expressions to identify forward-looking information and statements especially with respect to growth and financial performance of the Company's business units, contribution of our start-up business units, contribution of awarded programs yet to be launched, margin performance, financial performance of acquisitions and operating efficiencies are forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements throughout this document and are also cautioned that the foregoing list of important factors is not exhaustive. These forward-looking statements are based on our plans, intentions or expectations which are based on, among other things, assumptions about the number of automobiles produced in North America and Europe, the number of extrusion dies required in North America and South America, the rate of economic growth in North America, Europe and emerging market countries, investment by OEMs in drivetrain architecture and other initiatives intended to reduce fuel consumption and/or the weight of automobiles, raw material prices, economic conditions, currency fluctuations, trade restrictions, our ability to close or otherwise dispose of unprofitable operations in a timely manner, our ability to integrate acquisitions and the rate at which our operations in Brazil, Texas and Thailand achieve sustained profitability. These forward-looking statements include known and unknown risks, uncertainties, assumptions and other factors which may cause actual results or achievements to be materially different from those expressed or implied. The Company will update its disclosure upon publication of each fiscal quarter's financial results and otherwise disclaims any obligations to update publicly or otherwise revise any such factors or any of the forward-looking information or statements contained herein to reflect subsequent information, events or developments, changes in risk factors or otherwise. For a more extensive discussion of Exco's risks and uncertainties see the 'Risks and Uncertainties' section in our 2016 Annual Report, our 2016 Annual Information Form ("AIF") and other reports and securities filings made by the Company. This information is available at www.sedar.com

SOURCE Exco Technologies Limited

For further information:

Source: Exco Technologies Limited (TSX-XTC)
Contact: Darren Kirk, Executive Vice-President
Telephone: (905) 477-3065, Ext 7233
Website: http://www.excocorp.com

 

 
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