TORONTO, Jan. 31 /CNW/ - Exco Technologies Limited (TSX-XTC) today announced results for its first quarter ended December 31, 2006. In addition, the Company announced that a quarterly cash dividend of $0.015 per share will be paid March 30, 2007 to shareholders of record on March 16, 2007.
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3 Months ended
December 31
($000s, except per share amounts)
2006 2005
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Sales $48,751 $50,189
Net income before taxes $1,837 $2,959
Net income $1,108 $1,996
Basic and Diluted earnings per share $0.03 $0.05
Common shares outstanding 41,445,000 41,593,000
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Consolidated sales for the quarter ended December 31, 2006 were down 3% from last year at $48.8 million. The Casting and Extrusion segment reported first quarter sales of $30.1 million - a decrease of about $1 million from last year. Sales at the extrusion die businesses and Castool were up approximately 8% over last year. These two business units sell predominantly into industrial markets and have been consistently growing over the last year. Both these businesses also benefited from consolidation among their customer base. These global customers rely on established and reliable suppliers such as Exco to meet their increased demand. Large mould sales and Techmire shipments were down over last year. Large mould tooling orders were slow as their customers focused on design issues and conserving cash. Techmire also continued to experience weak demand for its traditional zinc products and technical issues delayed shipment of wheel weight machines to the second quarter.
The Automotive Solutions segment reported slightly weaker sales compared to last year of $18.6 million in the quarter. Combined North American sales by Neocon and Polytech have declined over last year as domestic North American carmakers have reduced production. Production volumes of SUVs and light trucks have not returned to traditional levels during the quarter and are only likely to do so after the full launch of next generation SUVs, light trucks and CUVs is complete. Polydesign sales to the European market, however, continued its growth trend with a 30% increase in quarterly sales over last year.
Net income for the period is $1.1 million or $0.03 per share compared to $2.0 million or $0.05 per share last year. Net income for the first quarter is traditionally lower than other quarters. The erosion in earnings was primarily in the Automotive Solutions segment. In this segment quarterly profit of $1.5 million was $1.1 million less than last year. Earnings were lower at most business units owing to lower production. Several operations also incurred start up costs associated with the launch of new business and at Neocon USA the cancellation of a DCX program for which capacity had been added. In this segment we expect earnings to improve with the launch of new business and refreshed programs. This allows us to better recover raw material increases which occurred over the last several years.
Income in the Casting and Extrusion segment was down slightly from last year by $77 thousand to $453 thousand. These weak earnings primarily reflect lower shipments of large moulds and continuing losses at Techmire of $0.02 cents per share. Earnings were also impacted by moving costs and production inefficiencies associated with relocating from the old Castool facility in Scarborough, Ontario to the new premises in Uxbridge.
Management is pleased with the working capital improvement in the last quarter. Last year it increased by $5.2 million compared to a reduction of $4.4 million this year. This generated cash from operations of $8.2 million for the quarter.
Exco increased its dividend in the quarter by 20% from $0.0125 to $0.015. Exco also paid for Castool's new Uxbridge production facility in the quarter. Despite these payments and reduction of accounts payable, Exco's net bank debt fell to $3.4 million in December from $6.8 million in September. Exco's net bank debt to equity ratio of 0.02:1 is now at its lowest level since Exco incurred debt to finance its acquisitions in 1999.
Since December the Canadian dollar has shown signs of weakening from recent historic highs. This is a positive trend for Exco. Automobile production at the domestic carmakers is expected to remain weak throughout the next quarter as overcapacity and losses are expected to persist. This will continue to put pressure on Exco's sales and capacity utilization and require Exco to continue its focus on costs at all levels. Sales to industrial markets by our extrusion tooling businesses and Castool should continue to experience solid growth. Industrial products revenues currently represent about 40% of annual consolidated sales and are expected to continue growing. Our major industrial customers are increasingly consolidating their global supply base - a trend that continues to favour Exco.
Exco expects to continue building on its strong base of business with the foreign domestics in the Automotive Solutions segment. There is much activity in this market sector and we expect to launch several key programs for Toyota later in the year. However, significant improvement in domestic OEM volumes will likely not take place this fiscal year. Our large mould businesses will benefit from relatively high fuel prices which are expected to continue driving OEMs to improve the efficiency of their power train systems. Nonetheless we expect design issues and serious cash flow issues faced by domestic OEMs and their Tier 1 die casters to complicate the timely release of new engine and transmission moulds.
Techmire is not expected to return to profitability during 2007. The price of zinc is expected to stay high and both dampen demand for zinc die-cast machines and increase demand for magnesium die-cast machines and moulds. Techmire, in the near term, is expected to prove out its magnesium die-cast capabilities with the delivery of mould and/or machines for both thin wall high finish magnesium parts and structural automotive magnesium components.
The recovery from recent raw material shocks is expected to slowly, yet steadily, continue. Tool grade steel is now more readily available allowing for lower inventory levels and improving margins. The cost of resin and other synthetic raw material is also moderating and is expected to lead to better margins in the Automotive Solution segment as well.
(for further information please refer to the Company's First Quarter Interim Financial Statements in the Investor Relations section posted at www.excocorp.com. Alternatively, please refer to www.sedar.com after January 31, 2007.)
Exco Technologies Limited is a global supplier of innovative technologies servicing the die-cast, extrusion and automotive industries. Through our 13 strategic locations, we employ 2,200 people and service a diverse and broad customer base.
The Annual Meeting of Shareholders of Exco Technologies Limited will be held at 4:30 pm (EST) and will be simultaneously webcast. Management will discuss year-end and first quarter results. To access the live audio webcast, please log on to www.excocorp.com or www.q1234.com a few minutes before the event. Real Player is required for access. For those unable to participate on January 31, 2007, an archived version will be available on the Exco website.
This news release contains 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. Such forward-looking information and statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe to be relevant and appropriate in the circumstances. Readers are cautioned not to place undue reliance on forward-looking information and statements, as there can be no assurance that the assumptions, plans, intentions or expectations upon which such statements are based will occur. Forward-looking information and statements are subject to known and unknown risks, uncertainties, assumptions and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed, implied or anticipated by such information and statements. These risks, uncertainties and assumptions include, among other things: industry cyclicality; global economic conditions, causing decreases in automobile production volumes and demand for capital goods; changing demand for specific models or products; price reduction pressures; pressure to absorb certain fixed costs; dependence on major customers and changes in such customers' financial capabilities; technological changes; compliance with various laws; obtaining necessary permits and consents; fluctuations in currency exchange and interest rates; employee work stoppages; dependence on key employees; the competitive nature of the automotive and capital goods industries, including competition with suppliers operating in low cost countries; product supply and demand; the conduct of business in foreign countries; and other risks, uncertainties and assumptions as described in the Company's Management's Discussion and Analysis included in our 2006 Annual Report, in our 2006 Annual Information Form and, from time to time, in other reports and filings made by the Company with securities regulatory authorities.
While the Company believes that the expectations expressed by such forward-looking information and statements are reasonable, there can be no assurance that such expectations and assumptions will prove to be correct. In evaluating forward-looking information and statements, readers should carefully consider the various factors which could cause actual results or events to differ materially from those indicated in the forward-looking information and statements. Readers are cautioned that the foregoing list of important factors is not exhaustive. Furthermore, the Company 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.
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