Improved profitability for the Water Treatment Group over last year, while Pulp and Paper Group's results still affected by the global economic slowdown. ------------------------------------------------------------------------- - Consolidated revenues of $113.3 M, posting a 22.1% decrease (26.9% at constant exchange rates) from the same quarter of the previous year, primarily attributable to the Pulp and Paper Group; - Gross margin representing 24.0% of revenues versus 22.7% last year, this improvement being attributable to the Water Treatment Group's increased profitability resulting mainly from its stronger focus on higher value-added contracts, efficient contract execution and growth in its aftermarket business; - Non-recurring expenses of $0.4 M associated primarily with a restructuring of the Pulp and Paper Group's operations in the United Kingdom in response to difficult market conditions; - 72.6% increase in the Water Treatment Group's normalized EBITDA(1), but 71.6% decrease in the Pulp and Paper Group's normalized EBITDA(1), resulting in a 48.9% decline in consolidated normalized EBITDA(1) which amounted to $3.7 M; - Consolidated normalized EBITDA margin of 3.3% (vs. 5.0% the previous year), of which a 7.2% margin (vs. 4.0%) for the Water Treatment Group and a 4.4% margin (vs. 9.5%) for the Pulp and Paper Group; - Consolidated normalized net earnings(3) of $1.1 M or $0.04 per share (basic and diluted), compared with $2.1 M or $0.08 per share (basic and diluted) the previous year; - Free cash flows of $1.3 M or $0.05 per share; - Order backlog of $244.5 M as at June 30, 2009, down 7.3% (at constant exchange rates) from March 31, 2009, primarily attributable to the Pulp and Paper Group; - GLV benefits from a healthy financial position, its total net debt ratio being almost nil giving effect to the $36.2 M net proceeds from the share offering closed on July 2, 2009. -------------------------------------------------------------------------
MONTREAL, Aug. 7 /CNW Telbec/ - (All amounts are in Canadian dollars unless otherwise indicated.) GLV Inc. ("GLV" or the "Company"; ticker symbols GLV.A, GLV.B / TSX) announces results in line with management's expectations for the first quarter of fiscal 2010, being the three-month period ended June 30, 2009. Keeping pace with prior quarters, the Water Treatment Group improved its profitability compared with the previous year while pursuing its market development strategy. The Pulp and Paper Group saw its performance affected, as expected, by the sharp slowdown in the global pulp and paper industry, which prompted GLV to implement further restructuring measures in order to adapt its cost structure to the challenging economic environment.
Consolidated Results --------------------
GLV's revenues totalled $113.3 M, down 22.1% (26.9% at constant exchange rates) from the same quarter of the previous year. This decrease is primarily attributable to the sharp drop in new infrastructure investments by the Pulp and Paper Group's global customer base.
Although the gross margin in dollars declined as a result of the lower revenues, the gross margin as a percentage of revenues improved from 22.7% last year to 24.0% this year, due mainly to the sustained improvement in the profitability of the Water Treatment Group's U.S. operations over the past few quarters, subsequent to the changes brought to the Salt Lake City division's strategic focus and operating management. In addition, the Water Treatment Group's gross margin also benefited from a significant growth in its aftermarket business.
Total selling and administrative expenses decreased by $2.3 M or 8.9% as a result of the cost-reduction measures implemented in fiscal 2009 to achieve annual savings of close to $8.5 M, of which $2.5 M in the Water Treatment Group and approximately $6.0 M in the Pulp and Paper Group. The additional measures implemented in this group during the first quarter of 2010 will yield further recurring savings of some $1.5 M annually.
GLV recorded non-recurring items of $0.4 M, substantially all of which consisted of costs incurred to restructure part of the Pulp and Paper Group's business. Excluding non-recurring items, first-quarter normalized EBITDA(1) amounted to $3.7 M., compared with $7.3 M the previous year. The normalized EBITDA margin as a percentage of revenues stood at 3.3% versus 5.0% the previous year. The decline in profitability is attributable to the difficult conditions affecting the Pulp and Paper Group, as the Water Treatment Group conversely posted a significant increase in its EBITDA and EBITDA margin over the same quarter of the previous fiscal year.
GLV closed the quarter with net earnings of $0.8 M or $0.03 per share (basic and diluted), compared with $2.1 M or $0.08 per share (basic and diluted) in the same quarter of the previous year. Excluding non-recurring items (net of related taxes), normalized net earnings(3) amounted to $1.1 M or $0.04 per share, compared with $2.1 M or $0.08 per share the previous year.
Results and Outlook for the Water Treatment Group ------------------------------------------------- This group's revenues amounted to $63.8 M, down 8.8% at constant exchange rates. Management estimates that this decline is not attributable to either a weakening of demand in the global water treatment solutions market, or to a decrease in the group's market share. It can be explained by the two key factors described below. - In the municipal segment, the group's revenues were affected the delays in the start-up of new water treatment infrastructure projects in the United States, where the implementation of the federal administration's economic stimulus plan is leading some municipalities to defer their investments. The municipal infrastructure upgrading and improvement market, however. is currently posting a good level of activity, due in part to the earmarked stimulus funds. Eimco Water Technologies is positioned to take advantage of such activity, given its recognized technologies, special expertise in this field and large installed equipment base. In Europe, although demand remains weak in England, the team dedicated to the marketing of integrated municipal solutions, which was created during the last fiscal year, has landed certain large-scale contracts in Ireland and Eastern Europe in recent months. In addition, Eimco Water Technologies is currently witnessing a significant increase in calls for tender in Eastern Europe. It should also be noted that the new technologies recently integrated by the Water Treatment Group - such as the LM(TM) Mixer advanced digester sludge mixing technology and the municipal and industrial wastewater sludge dewatering technology using electro-osmosis acquired in April 2009 - are being well received in the municipal market and have led to the first large-scale contracts. - In the industrial segment, revenues associated with water intake screening solutions for power stations posted a decrease that management deems temporary, as it is the consequence of a slowdown in new order bookings during the third quarter of fiscal 2009. The pace of new order bookings has picked up as of the fourth quarter of the last fiscal year. In this market niche, the group nevertheless achieved a good first-quarter performance in the United States, and increased its aftermarket revenues worldwide. It also increased its business in the food and beverage processing industry in the Asia-Pacific region and achieved an initial breakthrough in Europe subsequent to the recent expansion of the sales force and geographic distribution network for the technologies designed for this market niche.
The Water Treatment Group's normalized EBITDA(1) increased by $1.9 M or 72.6% to $4.6 M. The normalized EBITDA margin thus improved from 4.0% in the first quarter of fiscal 2009 to 7.2% in the same period this year. This is primarily attributable to an increase in the gross margin resulting from the growth in its aftermarket business and the major restructuring carried out by the Salt Lake City (Utah) division at the end of fiscal 2008, in order to refocus its business on higher value-added contracts, optimize its project management and lower its costs. Consistent with management's expectations, the benefits of this restructuring started to materialize in the second half of fiscal 2009. Furthermore, the recurring savings generated by the cost-optimization measures implemented in 2009 compensated for the additional selling and administrative expenses associated with the business acquired at the beginning of fiscal 2010 and the new GW&E joint venture set up in January 2009. For information purposes, the Water Treatment Group's normalized EBITDA margin stood at 7.2% for the 12-month period ended June 30, 2009, versus 3.7% for the equivalent 12-month period ended June 30, 2008, and 6.5% for the fiscal year ended March 31, 2009.
GLV's management is confident as to the Water Treatment Group's outlook for fiscal 2010, considering this industry's potential worldwide and the progress achieved by this group in recent quarters to optimize its business model and develop its presence in its key target markets, especially the municipal market in the United States and Eastern Europe, the global market for water intake screening solutions for power stations and desalination plants, and the food and beverage processing industry in the Asia-Pacific region, Europe and North America. As at June 30, 2009, the Water Treatment Group's order backlog stood at $179.5 M. At constant exchange rates, it reflected a slight decline of 3.3% from March 31, 2009 and a 15.5% decrease from June 30, 2008. These changes are primarily attributable to the aforementioned delays encountered in the start up of new municipal infrastructure projects in the U.S. market. Management nonetheless expects that this group will continue to increase its presence and revenues in 2010. GLV is also on the lookout for opportunities to integrate other technologies in order to complete its Water Treatment Group's offering, particularly in the area of process water treatment. In terms of profitability, GLV's management estimates that the favourable trend in the Water Treatment Group's normalized EBITDA margin since mid-2009 should continue due, among other factors, to the recurring savings of approximately $2.5 M achieved in 2009 and its ongoing optimization efforts.
Results and Outlook for the Pulp and Paper Group ------------------------------------------------
This group's revenues decreased by 38.3% (43.0% decrease at constant exchange rates) to $46.7 M in the first quarter. This decline, which mainly affected the sale of new equipment, reflects the significant and rapid degradation of conditions in the global pulp and paper industry since the winter of 2008-2009. In light of this context, additional streamlining measures were implemented within the Pulp and Paper Group, including the closure of an operating centre in England. These measures resulted in the recognition of non-recurring restructuring expenses of $0.4 M in first-quarter results, but will yield recurring savings of more than $1.5 M annually. Excluding the restructuring costs, the group's normalized EBITDA(1) decreased by 71.6% to $2.0 M. The normalized EBITDA margin thus slipped from 9.5% last year to 4.4% this year. Despite this decline attributable to the economic context, management estimates that the cost-reduction measures implemented in 2009 enabled this group to maintain profitable operations. For information purposes, the group's normalized EBITDA margin stood at 8.7% for the 12-month period ended June 30, 2009, versus 7.2% for the equivalent 12-month period ended June 30, 2008, and 9.6% for the fiscal year ended March 31, 2009.
As at June 30, 2009, the Pulp and Paper Group's order backlog stood at $58.0 M. At constant exchange rates, it reflected decreases of 18.2% from March 31, 2009 and 59.1% from June 30, 2008. GLV's management continues to believe that the first half of fiscal 2010 will be difficult for the Pulp and Paper Group due to global economic conditions. However, some positive signs have emerged in the global pulp and paper market in recent months, including a strengthening of pulp prices and an increase in the number of inquiries and calls for tender by the group's international customer base. Management is therefore confident that order bookings will pick up in the second half of fiscal 2010, which should enable the Pulp and Paper Group to return to a level of profitability in line with its objectives by fiscal 2011. In this regard, it should also be pointed out that the cost-reduction measures implemented in 2009 and at the beginning of fiscal 2010 should yield recurring savings of more than $7.5 M annually. GLV's ongoing development of an assembly centre in India should also contribute to further improve its operating profitability.
Overall Outlook for GLV -----------------------
As at June 30, 2009, GLV's order backlog stood at $244.5 M, compared with $272.7 M as at March 31, 2009 and $354.1 M as at June 30, 2008. These changes are primarily attributable to the significant slowdown in the global pulp and paper industry. In light of the groups' order backlogs and the current volume of new order bookings, GLV's management maintains the forecasts stated in June 2009, upon disclosure of the fiscal 2009 financial results, to the effect that the Water Treatment Group should deliver a good performance in 2010, whereas the first half of the fiscal year will be difficult for the Pulp and Paper Group, whose results should improve in the second half of the year once overall conditions in the global pulp and paper market start to gradually turn around. For fiscal 2010 as a whole, GLV expects to achieve consolidated revenues of $500 M to $550 M. However, should the Canadian dollar continue to appreciate against the U.S. dollar as has been the case since the spring of 2009, revenues could tend towards the low side of this range. The measures the two groups have taken in recent quarters to optimize their operations and adjust their cost structure to their market situation should yield recurring savings of close to $10 M annually, of which approximately $2.5 M in the Water Treatment Group and more than $7.5 M in the Pulp and Paper Group.
GLV's management intends to continue closely monitoring global economic conditions and will promptly react by implementing additional cost-reduction measures, if deemed appropriate based on its reading of market trends. It should be pointed out in this regard that GLV's manufacturing outsourcing strategy provides it with the flexibility to rapidly adjust its cost structure to the market reality. Furthermore, GLV has tightened its liquidity and risk management, particularly in regard to its project-related credit risks.
Finally, GLV benefits from a healthy financial position, especially since the Company's current loans are being used almost exclusively to finance its working capital. The $36.2 M net proceeds from the share offering completed on July 2, 2009 and the recent amendment to its principal financing agreement have further strengthened GLV's balance sheet. For information purposes, giving effect to these transactions, the total net debt ratio was almost nil as at June 30, 2009, whereas the Company benefited from unused sources of financing of $201.0 M. This positions GLV favourably not only to continue weathering the global recession and to finance its ongoing working capital requirements, but also to take advantage of acquisition opportunities in its key markets that the current economic context could create. The Company is actively seeking acquisition opportunities in the water treatment sector.
Annual General Meeting of Shareholders --------------------------------------
GLV wishes to advise its shareholders and the financial community that the Company's Annual General Meeting of Shareholders will be held on Wednesday, September 30, 2009, at 10:30 a.m. at the Montreal Sofitel Hotel, Pablo Picasso Room, 1155, Sherbrooke Street West, Montreal.
About GLV Inc. --------------
GLV is a leading global provider of technological solutions used in water treatment, recycling and purification, as well as in pulp and paper production. The Water Treatment Group (also known worldwide as "Eimco Water Technologies") specializes in the design and international marketing of solutions and high-performance, economical and eco-friendly processes for the treatment and recycling of municipal and industrial wastewater and water used in various industrial processes. It also offers water intake screening solutions for power stations, refineries and desalination plants. With its extensive technological portfolio, the group is positioned to provide comprehensive solutions for the filtration, clarification, treatment and purification of water that will either be returned into the environment, or be re-used in various industrial processes or for domestic purposes. The Pulp and Paper Group specializes in the design and global marketing of equipment and systems used in various stages of pulp and paper production, notably chemical pulping, pulp preparation and sheet formation and finishing. This group ranks among the foremost players in its industry and is a recognized leader in rebuilding, upgrading and optimization services for existing equipment, as well as the sale of spare parts. It also stands apart for the superior performance of several of its key products and technologies, notably in terms of energy savings. GLV is present in some 30 countries and has approximately 1,600 employees.
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The Interim Management's Report for the three-month period ended June 30,
2009, along with the interim consolidated financial statements
(unaudited) and accompanying notes, are being filed today on SEDAR's
website (www.sedar.com) and the Company's website (www.glv.com).
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CONFERENCE CALL WITH INVESTORS ON FINANCIAL RESULTS
FOR THE FIRST QUARTER OF FISCAL 2010
Friday, August 7, 2009, at 10:00 a.m. (Montreal Time)
To participate in the conference call, please dial 1-866-250-4892 a few
minutes before the start of the call. For those unable to participate, a
taped re-broadcast will be available starting Friday, August 7, 2009 from
noon until midnight, Friday, August 14, 2009, by dialing 1-877-289-8525;
access code 21312147(number sign). THE CONFERENCE CALL (AUDIO) AND A
POWER POINT PRESENTATION WILL BE AVAILABLE AT WWW.GLV.COM. Members of the
media are invited to listen in.
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Consolidated and Segmented Results, Cash Flows and Balance Sheet
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Change
(in thousands of $, except Three months 2009
percentages, per share data ended versus
and number of shares) June 30, 2008
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2009 2008 %
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Revenues:
Water Treatment 63,797 66,553 (4.1%)
Pulp and Paper 46,661 75,581 (38.3%)
Other and eliminations 2,877 3,356 (14.3%)
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Total 113,335 145,490 (22.1%)
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Gross margin 27,170 33,048 (17.8%)
Selling and administrative
expenses 23,436 25,737 (8.9%)
EBITDA 3,326 7,311 (54.5%)
Restructuring costs
Water Treatment 16 - -
Pulp and Paper 392 - -
Other and eliminations - - -
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Total 408 - -
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Normalized EBITDA(1):
Water Treatment 4,600 2,665 72.6%
Pulp and Paper 2,045 7,209 (71.6%)
Other and eliminations (2,911) (2,563) 13.6%
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Total 3,734 7,311 (48.9%)
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Depreciation and amortization:
Water Treatment 963 1,571 (38.7%)
Pulp and Paper 829 755 9.8%
Other and eliminations 1,325 745 77.9%
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Total 3,117 3,071 1.5%
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Normalized EBIT(2):
Water Treatment 3,637 1,094 232.4%
Pulp and Paper 1,216 6,454 (81.2%)
Other and eliminations (4,236) (3,308) 28.1%
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Total 617 4,240 (85.4%)
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Financial expenses (793) 1,480 -
Income taxes 204 655 (68.9%)
Effective tax rate 20.4% 23.7% -3.3% pts
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Net earnings (loss) 798 2,105 (62.1%)
per share (basic and diluted) 0.03 0.08
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Normalized net earnings(3) 1,124 2,105 (46.6%)
per share (basic and diluted) 0.04 0.08
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Weighted average number
of participating shares
outstanding (in thousands):
basic and diluted 26,544 26,403 0.5%
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Margins as a percentage
of revenues:
Gross margin 24.0% 22.7%
Normalized EBITDA 3.3% 5.0%
Normalized EBIT 0.5% 2.9%
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Free cash flow(4) 1,336 5,038
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Order backlogs: June 30, March 31, June 30,
2009 2009 2008
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Water Treatment 179,501 191,640 200,397
Pulp and Paper 57,980 74,157 142,949
Manufacturing Unit 6,983 6,882 10,772
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Total 244,464 272,679 354,118
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(1) According to the reporting periods, earnings before depreciation and
amortization, financial expenses, income taxes and items recorded
outside the normal course of business, including restructuring costs.
(2) According to the reporting periods, earnings before financial
expenses, income taxes and items recorded outside the normal course
of business, including restructuring costs.
(3) According to the reporting periods, net earnings before items
recorded outside the normal course of business, including
restructuring costs (less related taxes).
(4) Cash flows from operating activities excluding net changes in non-
cash balances related to operations, less property, plant and
equipment acquisitions (net of disposals).
EBITDA, EBIT, normalized net earnings and free cash flows are not
performance measures consistent with Canadian generally accepted accounting
principles ("GAAP"). The information regarding measures not consistent with
Canadian GAAP is contained in the Company's Management's Report filed on SEDAR
and on the Company's website (www.glv.com) effective today.
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Notice Regarding Forward-Looking Statements:
Certain statements included in this press release may constitute, within the meaning of applicable securities legislation, forward-looking statements relating to the Company's future growth trends, operating results and performance. Forward-looking statements concern analyses and other information based on forecasted future results and the estimate of amounts that cannot yet be determined. These may be observations concerning, among others, strategies, expectations, objectives, projections, estimates, predictions, planned activities or future actions. Forward-looking statements are recognized by the use of terms such as "forecast", "project" "could", "plan", "aim", "estimate" and other similar terms, possibly used in the future or conditional, notably in regard to certain assumptions. The purpose of the forward-looking statements included herein is to assist the reader in understanding the nature and the importance of the changes and trends, as well as the risks and uncertainties associated with the Company's operations and financial position, and may not be appropriate for other purposes.
The Company's management would like to point out that forward-looking statements involve a number of risks and uncertainties such that the Company's actual and future results could differ materially from the conclusions, assumptions or projections reflected in these forward-looking statements. Factors of uncertainty and risk that might result in such material differences include trends in the demand for the Company's products and services and cost of its raw materials, fluctuations in the value of various currencies, tightening of credit markets, pressures exerted on prices by the competition and general changes in economic conditions. The Company cautions readers that the foregoing list of risk factors is not exhaustive. Although the Company believes these assumptions to be reasonable and appropriate based on the information in its possession, there can be no assurance as to the materialization of the results, performance or achievements as expressed in or underlying the forward-looking statements. In addition, unless otherwise indicated, the forward-looking statements included in this Interim Management's Report were set forth at the date hereof, and unless required to do so pursuant to applicable securities legislation, management assumes no obligation as to the updating or revision of the forward-looking statements as a result of new information, future events or other changes.
For further information about the various factors that might affect the Company's future results, the reader is referred to the Company's filings with Canadian securities regulatory authorities, including the "Risk Management" section of this Interim Management's Report for the three-month period ended June 30, 2009 and Section V, "Risk Management" of the Management's Report for the fiscal year ended March 31, 2009, available on the websites of SEDAR (www.sedar.com) and GLV Inc. (www.glv.com).
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