MONTREAL, Nov. 12 /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 its results for the second quarter and first half of fiscal 2010, being the three and six-month periods ended September 30, 2009. As expected, the Pulp and Paper Group's performance continued to be severely affected during the second quarter by the sharp slowdown in the global pulp and paper industry, although the group's volume of new order bookings has started to stabilize. Despite a slight decline in its revenues, the Water Treatment Group further improved its profitability in comparison with the previous year.
Consolidated Results
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Second-quarter consolidated revenues totalled $104.0 M, posting a 30.7% decrease (at constant exchange rates) primarily attributable to the Pulp and Paper Group. For the six-month period ended September 30, 2009, consolidated revenues decreased by 28.8% (at constant exchange rates) to $217.4 M. The gross margin as a percentage of revenues increased from 20.8% last year to 26.4% this year, due to the sustained improvement in the profitability of the Water Treatment Group's U.S. operations and the larger share of both groups' aftermarket business in their revenue mix; this market accounted for 34.9% of second-quarter consolidated revenues, compared with 26.7% a year earlier. The gross margin for the first half of fiscal 2010 represented 25.2% of consolidated revenues versus 21.7% the previous year. Selling and administrative expenses decreased by 3.1% in the second quarter and by 6.1% or $3.0 M for the full six-month period as a result, primarily, of the cost-reduction measures implemented during fiscal 2009 and at the beginning of fiscal 2010 to achieve savings of approximately $10 M annually. During the quarter ended September 30, 2009, GLV recorded non-recurring items totalling $1.0 M consisting mainly of severance pay, of which $0.4 M in the Pulp and Paper Group and the Manufacturing unit and $0.6 M in the Water Treatment Group. The costs incurred by the Water Treatment Group relate to the closing of an operating unit in the United Kingdom, whose activities were transferred to outsourcing partners. For the first half of fiscal year 2010, non-recurring restructuring costs totalled $1.4 M.
Excluding non-recurring items, second-quarter normalized EBITDA(1) amounted to $4.7 M, for a 4.5% margin as a percentage of revenues, compared with $7.5 M and 5.0% of revenues the previous year. This decline is attributable to the difficult market conditions affecting the Pulp and Paper Group, as the Water Treatment Group posted an increase in its EBITDA and EBITDA margin. For the first half of fiscal 2010, consolidated normalized EBITDA totalled $8.4 M, compared with $14.8 M for the first six months of the previous year, whereas the normalized EBITDA margin was 3.9% versus 5.0% the previous year. During the second quarter, GLV recorded net financial income of $0.4 M, as opposed to net financial expenses of $1.2 M in the same period last year. This $1.6 M favourable variation is attributable to the change in fair value of derivative financial instruments and a decrease in interest on the long-term debt. For the six-month period, GLV recorded net financial income of $1.2 M, as opposed to net financial expenses of $2.7 M for the first half of the previous year, a favourable variation of $3.9 M.
GLV closed the second quarter with normalized net earnings(3) of $1.8 M or $0.06 per share (basic and diluted), compared with normalized net earnings of $2.9 M or $0.11 per share (basic and diluted) the previous year. For the first half of fiscal 2010, GLV posted year-to-date normalized net earnings of $2.9 M or $0.10 per share (basic and diluted), compared with normalized net earnings of $5.0 M or $0.19 per share (basic and diluted) for the first six months of the previous year.
On July 2, 2009, GLV issued 5.3 million shares for net proceeds of $36.2 M. Combined with its free cash flows, the cash flows provided by its working capital and cash in hand, the Company temporarily used the net proceeds from the offering to repay $51.1 M, being substantially all of its long-term debt. GLV's total debt was lowered from $51.2 M as at March 31, 2009 to $1.9 M as at September 30, 2009. Consequently, the Company ended the second quarter with a $2.9 M cash surplus over its total debt.
Results and Outlook for the Water Treatment Group
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At constant exchange rates, this group's quarterly revenues decreased by 8.4% to $61.4 M, due mostly to delays in the execution of certain contracts which are attributable to customers, especially in the United Kingdom. Eimco Water Technologies (or "EWT") expects to recover this revenue shortfall in upcoming quarters. Conversely, revenues from the aftermarket grew by 54.0% to account for 17.0% of total revenues (versus 10.1% the previous year); this performance was primarily achieved in the U.S. municipal market and the global market for water intake screening solutions. For the six-month period, the group's revenues decreased by 8.6% at constant exchange rates. However, aftermarket revenues increased by 82.9% to account for 16.6% of total revenues (versus 8.5% the previous year).
In the municipal segment, the Water Treatment Group recorded solid activity during the first half of fiscal 2010 in regard to the upgrading of existing infrastructures in the United States, driven notably by EWT's extensive installed equipment base. However, investments in new municipal infrastructure projects have been delayed during the past quarters, due notably to the complexity and restrictions imposed by the Buy American Act, which have delayed the launch of several large municipal projects. It seems that this situation has started to improve, as attested to by the launch of large municipal projects in the last few weeks and the recent award to Eimco Water Technologies of a number of large-scale contracts related to new municipal infrastructures, including for the supply of submerged membrane bioreactors (MBR). In the industrial segment, after a temporary first-quarter decline in revenues associated with water intake screening projects, the group's revenues and order backlog have started to grow again. This type of activity is likely to account for a substantial share of the Water Treatment Group's revenues in the future, especially since the planned acquisition of Christ Water Technology AG ("CWT") would provide it with a more complete and stronger value-added technological portfolio to serve the high-potential energy and seawater desalination markets. EWT also continues to develop its business base in the food and beverage processing niche in the Asia-Pacific region, South-East Asia and Europe, whereas the new joint venture GW&E is working to achieve a breakthrough in this market in North America.
The group's second-quarter normalized EBITDA(1) increased to $4.6 M from $3.5 M last year. The normalized EBITDA margin thus improved from 5.2% to 7.5%. This improvement, which is in line with management's expectations, is primarily attributable to an increase in the group's gross margin resulting, among other factors, from the growth in its aftermarket sales, increasingly efficient project management and contract execution, and a turnaround in the Canadian operations' performance. For the first half of fiscal 2010, the Water Treatment Group's normalized EBITDA totalled $9.2 M, compared with $6.2 M for the first six months of the previous year. The year-to-date normalized EBITDA margin thus improved from 4.6% in the first half of fiscal 2009 to 7.3% in the same period this year. In addition, excluding the expenses incurred by two subsidiaries of the Water Treatment Group, dedicated to the marketing of new technologies, but which have not yet started recording revenues, the normalized EBITDA margin of this group for the three and six-month periods ended September 30, 2009, would have been 8.3% and 8.1% respectively.
For information purposes, this graph presents the Water Treatment Group's normalized EBITDA and normalized EBITDA margin for the full 12-month periods ended on the indicated dates. The Water Treatment Group's normalized EBITDA margin for the 12-month period ended September 30, 2009 stood at 7.7%, versus 3.8% for the equivalent 12-month period ended September 30, 2008, and 6.5% for the fiscal year ended March 31, 2009.
As at September 30, 2009, the Water Treatment Group's order backlog stood at $165.1 M. At constant exchange rates, it reflected a 0.1% increase over June 30, 2009 and a 16.9% decrease from September 30, 2008. According to management, these changes are due primarily attributable to customers' delays in the start-up of certain contracts. Between now and the end of fiscal 2010, notwithstanding the acquisition of CWT, GLV's management expects that this group will continue to increase its presence in its principal target markets. In addition, GLV's management estimates that the favourable trend in the Water Treatment Group's normalized EBITDA margin since mid-fiscal 2009 should continue, with the result that this group's normalized EBITDA margin could reach the target objective of 10% toward the end of the current fiscal year. However, the significant rise in the Canadian dollar in relation to the U.S. dollar over the past few weeks could delay the achievement of this objective. Management aims to reach and maintain a 10% margin from a long-term perspective, subject however to certain fluctuations related to economic conditions, changes in exchange rates and the types of contracts executed and their execution schedule. Over the longer term, the acquisition of Christ Water Technologies and the integration of its operations with those of Eimco Water Technologies would be a major driver for this group's global growth and leadership.
Results and Outlook for the Pulp and Paper Group
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During the second quarter, the Pulp and Paper Group's revenues decreased by 48,7% (at constant exchange rates) to $40.6 M. In addition to the finalization of a large-scale contract that was in progress during the corresponding quarter of the previous year, this decline is attributable to the severe slowdown in the global pulp and paper industry since the winter of 2008-2009, which mostly affected sales of new equipment, but also sales of spare parts, which were below management's expectations. Considering the sharper decline in sales of new equipment, however, the aftermarket accounted for 62.2% of the group's total second-quarter revenues, compared with 41.1% in the same quarter last year. During the first six months of fiscal 2010, this group's revenues decreased by 45.9% (at constant exchange rates) to $87.3 M. The aftermarket thus accounted for 60.8% of the group's year-to-date revenues, up from 43.1% in the first half of fiscal 2009.
The Pulp and Paper Group's normalized EBITDA(1) amounted to $2.3 M versus $6.3 M the previous year, whereas its normalized EBITDA margin slipped from 8.0% last year to 5.7% this year. This decline is mainly attributable to lower revenues resulting from the economic context. However, it should be noted that the group improved its gross profit margin (as a percentage of revenues), due to the larger share of the aftermarket in its revenue mix and sound overall management of its operations. For the first six months of the current fiscal year, the Pulp and Paper Group recorded year-to-date normalized EBITDA of $4.4 M versus $13.5 M the previous year, whereas its normalized EBITDA margin decreased from 8.8% to 5.0%. Management estimates that the cost-reduction measures implemented during fiscal 2009 and since the beginning of fiscal 2010, combined with sound overall management and the contribution of the aftermarket, enabled this group to preserve its operating profitability.
For information purposes, this graph presents the Pulp and Paper Group's normalized EBITDA and normalized EBITDA margin for the full 12-month periods ended on the indicated dates. For the 12-month period ended September 30, 2009 (which coincided with the first full year of the global recession), this group's normalized EBITDA margin stood at 8.4%, versus 7.8% for the equivalent 12-month period ended September 30, 2008, and 9.6% for the fiscal year ended March 31, 2009. This trend shows that this group can achieve an EBITDA margin of 10% and over with revenues of approximately $300 M, considering its product selection (including spare parts), cost structure and lean organization, notably in the area of project management.
As at September 30, 2009, the Pulp and Paper Group's order backlog stood at $54.3 M. At constant exchange rates, it reflected a 3.6% decrease from June 30, 2009 and a 56.7% decrease from September 30, 2008. The decline in the order backlog witnessed within the past year as a result of the global slowdown in the pulp and paper industry is tending to abate. For instance, the Pulp and Paper Group recently announced it had been awarded several large-scale contracts, including two orders totalling $7.8 M for new pulp preparation equipment in the United States. Furthermore, order bookings in the aftermarket have improved in the last few weeks, especially in Europe. In light of the positive signs that continue to materialize in the global pulp and paper market, including a strengthening of pulp prices and an increase in the number of inquiries and calls for tenders by the group's international customer base, GLV's management still believes that order bookings will gradually pick up in the second half of fiscal 2010, which should enable the Pulp and Paper Group to improve its profitability as of fiscal 2011. However, between now and the end of fiscal 2010, the Pulp and Paper Group's results will continue to be affected by the weakness of its new order bookings over the past 12 months, although the cost-reduction measures implemented in recent quarters to yield recurring savings of more than $7.5 M annually should enable this group to maintain an acceptable level of profitability in the current context.
Overall Outlook for GLV
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As at September 30, 2009, GLV's order backlog stood at $225.4 M. At constant exchange rates, it reflected decreases of 1.2% from June 30, 2009 and of 32.1% from September 30, 2008. Notwithstanding the acquisition of CWT, for the full fiscal year 2010, based on its groups' order backlogs as at September 30, 2009 and current trends in its various markets, GLV expects to achieve consolidated revenues of $460 M to $480 M. This represents a downward adjustment from the $500 M to $550 M revenue forecast stated in June 2009, upon disclosure of the fiscal 2009 financial results. This adjustment can be explained by the significant rise in the Canadian dollar in relation to the U.S. dollar over the past few weeks, and by a weaker than expected performance by the Pulp and Paper Group, especially in the spare parts niche. GLV's profitability should continue to be driven by the ongoing optimization of the Water Treatment Group's operations, the growth of its aftermarket revenues and the development of its outsourcing activities, as well as by the measures both groups have taken in recent quarters to lower their costs.
The acquisition of CWT, which management hopes to close in the third quarter, and its combination with EWT will contribute additional revenues of approximately $275 M during the first full year post-closing, and thereby contribute to GLV meeting its objective of achieving revenues of $1 billion within a few years, of which $700 M from the Water Treatment Group.
Planned Acquisition of Christ Water Technology AG - Update
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On September 22, 2009, GLV announced the launch of a voluntary takeover bid (the "Offer") to purchase up to 100% of the shares of Christ Water Technology AG ("CWT"), an Austria-based company listed on the Vienna Stock Exchange conducting international operations in the area of industrial and municipal water treatment technologies. The Offer was officially launched on October 13, 2009, at the beginning of the third quarter, immediately after its approval by the Austrian Takeover Commission. On October 15, 2009, CWT's largest shareholder, who holds approximately 27% of its shares, tendered all his shares into the Offer. Additionally, as communicated on October 23, 2009, the Offer received a favourable recommendation from CWT's Management and Supervisory Boards.
On October 30, 2009, GLV issued a total of 7,358,173 subscription receipts at a price of $7.25 per receipt to the Caisse de dépôt et placement du Québec (the "Caisse") and the Solidarity Fund QFL (the "Fund"). Each subscription receipt will be exchangeable, for no additional consideration, into one Class A subordinate voting share of GLV upon the closing of the voluntary takeover bid launched by GLV to purchase up to 100% of the shares of CWT. The gross proceeds from the private placement of subscription receipts totalled $53.3 M, of which $39.8 M comes from the Caisse and $13.5 M from the Fund, and has been placed in escrow until the Offer closing, which is subject to certain conditions. These proceeds will be used to finance part of the planned equity purchase price of approximately $105 M. The acquisition will also be financed by the issue of a $25 M subordinated debenture to the Fund and using GLV's existing credit facility.
On November 5, 2009, GLV announced it was reducing the minimum acceptance threshold for shares to be tendered by CWT's shareholders into the Offer from 90% to 75% of CWT's outstanding shares. As communicated to the Austrian Takeover Commission, GLV's management confirmed that the offered price as well as the tender period would in no way be altered. CWT's shareholders have until November 17, 4:00 p.m. (Vienna time) to tender their shares into the Offer. After that date, the Offer will lapse if, among other conditions, the 75% minimum tender threshold has not been reached. If the minimum tender threshold condition is met, the Offer will close toward the end of November 2009, subject to various other relevant conditions described in the Offer documentation.
The Offer documentation and previously published press releases are available on GLV's website (www.glv.com).
About GLV Inc.
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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 1,500 employees.
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The Interim Management's Report for the three and six-month periods ended
September 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 SECOND QUARTER OF FISCAL 2010
Thursday, November 12, 2009, at 2:00 p.m. (Montreal time)
To participate in the conference call, please dial 1-877-974-0453 a few
minutes before the start of the call. For those unable to participate, a
taped re-broadcast will be available starting Thursday, November 12, 2009
from 4:00 p.m. to midnight, November 19, 2009, by dialing 1-877-289-8525;
access code 4180009#. 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) September 30, 2008
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2009 2008 %
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Revenues:
Water Treatment 61,392 67,137 (8.6%)
Pulp and Paper 40,612 78,340 (48.2%)
Other and eliminations 2,012 4,082 (50.7%)
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Total 104,016 149,559 (30.5%)
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Gross margin 27,512 31,047 (11.4%)
Selling and administrative expenses 22,828 23,556 (3.1%)
EBITDA 3,724 7,491 (50.3%)
Restructuring costs
Water Treatment 595 - -
Pulp and Paper 239 - -
Other and eliminations 126 - -
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Total 960 - -
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Normalized EBITDA(1):
Water Treatment 4,589 3,495 31.3%
Pulp and Paper 2,314 6,301 (63.3%)
Other and eliminations (2,219) (2,305) (3.7%)
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Total 4,684 7,491 (37.5%)
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Depreciation and amortization:
Water Treatment 987 1,400 (29.5%)
Pulp and Paper 701 709 (1.1%)
Other and eliminations 1,183 815 45.2%
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Total 2,871 2,924 (1.8%)
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Normalized EBIT(2):
Water Treatment 3,602 2,095 71.9%
Pulp and Paper 1,613 5,592 (71.2%)
Other and eliminations (3,402) (3,120) 9.0%
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Total 1,813 4,567 (60.3%)
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Financial expenses (424) 1,224 -
Income taxes 283 419 (32.5%)
Effective tax rate 22.2% 12.5% 9.7% pts
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Net earnings 994 2,924 (66.0%)
per share (basic and diluted) 0.03 0.11
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Normalized net earnings(3) 1,762 2,924 (39.7%)
per share (basic and diluted) 0.06 0.11
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Weighted average number
of participating shares
outstanding (in thousands):
basic and diluted 31,776 26,543 19.7%
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Margins as a percentage of revenues:
Gross margin 26.4% 20.8%
Normalized EBITDA 4.5% 5.0%
Normalized EBIT 1.7% 3.1%
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Free cash flow(4) 1,073 6,413
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Order backlogs: Sept. 30, June 30, March 31,
2009 2009 2009
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Water Treatment 165,111 179,501 191,640
Pulp and Paper 54,253 57,980 74,157
Manufacturing Unit 6,045 6,983 6,882
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Total 225,409 244,464 272,679
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Change
(in thousands of $, except Six months 2009
percentages, per share data ended versus
and number of shares) September 30, 2008
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2009 2008 %
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Revenues:
Water Treatment 125,189 133,690 (6.4%)
Pulp and Paper 87,273 153,921 (43.3%)
Other and eliminations 4,889 7,438 (34.3%)
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Total 217,351 295,049 (26.3%)
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Gross margin 54,682 64,095 (14.7%)
Selling and administrative expenses 46,264 49,293 (6.1%)
EBITDA 7,050 14,802 (52.4%)
Restructuring costs
Water Treatment 611 - -
Pulp and Paper 631 - -
Other and eliminations 126 - -
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Total 1,368 - -
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Normalized EBITDA(1):
Water Treatment 9,189 6,160 49.2%
Pulp and Paper 4,359 13,510 (67.7%)
Other and eliminations (5,130) (4,868) 5.4%
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Total 8,418 14,802 (43.1%)
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Depreciation and amortization:
Water Treatment 1,950 2,971 (34.4%)
Pulp and Paper 1,530 1,464 4.5%
Other and eliminations 2,508 1,560 60.8%
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Total 5,988 5,995 (0.1%)
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Normalized EBIT(2):
Water Treatment 7,239 3,189 127.0%
Pulp and Paper 2,829 12,046 (76.5%)
Other and eliminations (7,638) (6,428) 18.8%
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Total 2,430 8,807 (72.4%)
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Financial expenses (1,217) 2,704 -
Income taxes 487 1,074 (54.7%)
Effective tax rate 21.4% 17.6% 3.8% pts
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Net earnings 1,792 5,029 (64.4%)
per share (basic and diluted) 0.06 0.19
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Normalized net earnings(3) 2,886 5,029 (42.6%)
per share (basic and diluted) 0.10 0.19
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Weighted average number
of participating shares
outstanding (in thousands):
basic and diluted 29,174 26,473 10.2%
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Margins as a percentage of revenues:
Gross margin 25.2% 21.7%
Normalized EBITDA 3.9% 5.0%
Normalized EBIT 1.1% 3.0%
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Free cash flow(4) 2,409 11,451
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Order backlogs: Dec. 31, Sept. 30,
2008 2008
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Water Treatment 192,293 202,243
Pulp and Paper 88,152 123,791
Manufacturing Unit 10,521 9,616
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Total 290,966 335,650
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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 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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