COEUR D'ALENE, ID, March 31 /CNW/ - WGI Heavy Minerals, Incorporated (TSX: WG) today announced results for the fourth quarter and year ended December 31, 2007. Results have been filed and may be viewed at www.sedar.com. A summary of key financial results for the quarter and year compared to last year are as follows:
Highlights
- Revenues increased 12.5% for the quarter to $6.3 million and
increased 20.1% for the year to a record $26.6 million.
- Gross margin increased to 17.1% for the quarter from 13.6% in the
same period last year. Gross margin increased to 21.1% for the year
from 14.0% last year.
- The net loss for the quarter has increased to $0.9 million from last
year's $0.7 million loss. The net loss for 2007 was $1.5 million or
$0.06 per share compared to a loss of $4.0 million or $0.17 per share
in 2006.
- At December 31, 2007 the Company had a cash position (including short
term investments) of $17.3 million.
"WGI continues to improve its performance operationally and in every aspect of the business. These improvements are more significant as they come in the face of changing ore bodies with lower and dirtier concentrations of garnet, a situation encountered by many of our competitors as well. Further mining and mineral processing improvements are required and are being developed, requiring some modest investment. As and when we can open new ore bodies our improved techniques will be very beneficial. Our waterjet and European operations have grown nicely and are expected to continue to do so. The Company continues to confront a political and regulatory context in India that is actively unwelcoming, notwithstanding the rhetoric of a New India. However, our positions have been, thus far, supported by the courts and we are cautiously encouraged that we may yet see positive results for our efforts. We shall continue to improve," said, Covell D. Brown Chairman and CEO.
Results of Operations
Revenues for 2007 increased 20.1 percent to $26.56 million, compared with $22.11 million for 2006. Despite strengthening demand, garnet shipments, in tons, increased only 3.6 percent due to production constraints in the U.S. and India, caused by wet weather and lower production from declining concentration of garnet in areas mined.
However, WGI realized modestly higher garnet and abrasives prices, due to industry-wide price increases. WGI also enjoyed a greater percentage of sales from aftermarket ultra high pressure waterjet cutting machine replacement parts. The Company's revenues come from the following products: Garnet (63%), Waterjet Replacement Parts (18%), and Other Abrasives (19%).
Gross profit margins increased to 21.1 percent in 2007, compared with 14.0 percent in 2006. Increased garnet prices were principally responsible for higher gross margins. World-wide there has been a shortage of high quality garnet in appropriate sizes. WGI has been able to produce desirable grades, thus improving margins. This benefit was partially offset by increased production costs in both the U.S. and Indian mining operations. These increased productions costs in the U.S. operation were due to lower concentrate of garnet and thus, the need to process more run of mine to produce finished product. The increased production costs in India were due to a combination of factors, principally higher energy costs and lower concentrate of garnet.
General and administrative expenses in 2007 increased 3.2 percent year over year.
The Company posted a net loss of $1.5 million, or $0.06 per share, for 2007, compared with a net loss of $4.0 million, or $0.17 per share, for 2006.
4th Quarter Results
For the fourth quarter of 2007, net sales increased 12.5 percent to $6.36 million, compared with $5.64 million in the fourth quarter of 2006. Higher garnet/abrasive volume compounded by higher prices and increased waterjet parts drove the increased result.
Gross profit margins for the fourth quarter were 17.1 percent in 2007, compared with 13.6 percent in 2006. While adverse weather and increased fuel costs increased production costs at both Transworld Garnet (Pvt.) Ltd. ("TGI" or "Transworld") and ECG, these were partially offset by increased sales prices of finished product in both operations for the quarter and continued growth by Kominex.
Operating expenses increased by 22 percent during the fourth quarter 2007 from 2006. Increased expenses are primarily due to increased costs of $0.17 million for board fees, $0.04 million exploration, $0.05 million maintenance cost at Andhra Pradesh.
The Company recorded a foreign exchange gain of $0.04 in the fourth quarter of 2007 compared to a foreign exchange gain of $nil in 2006.
The resulting net loss was $0.8 million, or $0.03 per share for the fourth quarter of 2007, compared to a net loss of $0.7 million, or $0.03 per share, for the fourth quarter of 2006.
Segmented Results
Net sales of the Company's Indian operations distributed through the Company's North American subsidiary increased 10 percent in 2007 to $8.12 million. This was despite slightly decreased production. Profitability was positively affected by higher selling prices. This was offset by higher operating costs per unit, higher labour and transportation costs, and the on-going development expense at Andhra Pradesh. This segment posted a $0.31 million profit for the year (2006 - $0.95 million loss).
The Company's European operation, Kominex Mineralmahlwerk Ermsleben GmbH (Kominex), generated sales of $9.95 million, an increase of 40 percent from the prior year. The increase was due to significant increases in volumes across all product lines, including garnet acquired from WGI's subsidiary Transworld Garnet India in the amount of $4.38 million. Kominex's earnings before tax increased to $1.24 million in 2007 compared to $0.41 million in 2006.
Revenue for the Company's U.S. mining operations, ECG, decreased 3 percent to $4.47 million, primarily due to fewer tons produced due to production constraints stemming from both weather and lower garnet concentrations. The loss for the year for ECG was $1.18 million, compared to a loss of $1.03 million in 2006.
Revenue for the Company's U.S. manufacturing operation, IWP increased to $4.15 million in 2007 from $3.13 million in 2006. The increase of 32 percent compared to 2006 was due to improved management and systems including marketing and sales, strengthening demand and a broader product offering. The net income for the year for IWP was $.07 million compared to a loss of $0.19 million in 2006.
Liquidity and Capital Resources
Cash and short-term investments were reduced by $1.07 million in 2007. This compares to a reduction of $4.28 million for the year of 2006. Cash flow from operating activities was an inflow of $1.1 million for the twelve-month period ended December 31, 2007. Cash outflows were primarily related to capital expenditures.
Working capital, including the current portion of long-term debt, was $20.89 million at the end of 2007, compared to $22.23 million at year-end 2006, translating into current ratios of 5.52 and 6.26, respectively.
Working capital decreased $1.34 million in 2007, largely due to a $1.07 million reduction in cash and short-term deposits, which were used to fund capital expenditures of $1.57 million, reduce debt of $0.53 million, repurchase the Company's shares with $0.04 million and maintain operations. As of the end of 2007, the Company's debt-to-equity ratio was 17.2 percent, compared with 17.4 percent at year-end 2006.
Capital expenditures of $1.57 million for 2007 included $0.22 million for mineral properties and deferred development and $1.35 million for property, plant and equipment. The Company anticipates budgeting somewhat more for capital expenditures in 2008. The Company has sufficient resources to fund these capital expenditures. Only immediately needed or higher return capital items are budgeted.
Outlook
The Company continues to look for additional land and sources of supply to strengthen its resources and to continue to manufacture in Tamil Nadu. Recent results have been encouraging. Should this land and necessary mining leases be obtained on a timely basis, improvements in profitable sales are expected.
The Andhra Pradesh, India project may take the Company several years to sort out the critical issues before the Company. If the Company were to obtain all of the licenses and permits immediately, the Company would perhaps not be in a position to operate commercially until sometime in 2009. However, earlier scenarios are also possible. The Company is not in a position to predict the timing of operations in Andhra Pradesh.
The Company is making strenuous efforts to return to profitability at ECG through reinvestment in the facility and improved procedures. Significant improvements in ECG's performance are not expected in 2008. The Company expects continued improvement in volume and profitability from IWP. Performance in Europe has seen increased profitable volumes in most product lines. Sales in the Far East are growing and the Company anticipates modest growth in sales and income for 2008.
China is beginning to be a useful source of mineral supply as well as a growing market. Strong efforts are being made to source more material from this area.
WGI Heavy Minerals, Incorporated is a fully integrated miner, producer, and marketer of industrial-grade minerals and replacement parts for ultra-high waterjet cutting systems. The Company's operations include mining and processing facilities in Idaho, U.S. (Emerald Creek Garnet), Tamil Nadu, India (Bengal Bay Garnet) and Ermsleben, Germany (Kominex) and a manufacturing facility in Washington, U.S. (International Waterjet Parts).
This press release contains forward-looking statements concerning the business, operations, and financial performance and condition of WGI Heavy Minerals, Incorporated. A number of the matters discussed and statements made in the press release contain forward-looking statements reflecting current expectations regarding future assets. When used in this press release, the words "believe", "anticipate", "intend", "estimate", "expect", "project", and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. These forward-looking statements are based on current expectations and are naturally subject to risks, uncertainties, and changes in circumstances beyond management's control that may cause actual results to differ materially from those expressed or implied by such forward-looking statements. Factors that may cause such differences include but are not limited to: exploration and development risks; risks related to permits and title to property; risks related to foreign countries and regulatory requirements; operating hazards; foreign currency fluctuations; competition; fluctuations in the market price of mineral commodities and transportation costs; uncertainty as to calculations of mineral deposit estimates; uninsured risks; and dependence upon key management personnel and executives. Actual results may differ materially from those expressed here. You should not place undue reliance on such forward-looking statements. The Company is under no obligation to update or alter such forward-looking statements, whether as a result of new information, future events, or otherwise.
WGI Heavy Minerals, Incorporated
Financial Information
(in thousands, except for per share amounts)
-------------------------------------------------------------------------
As at As at
December December
Consolidated Balance Sheet 31, 2007 31, 2006
--------------------
Assets
Cash and Short term deposits 17,250 18,321
Other Current Assets 8,263 8,136
--------------------
Total Current Assets 25,513 26,456
Property, plant and equipment 8,024 7,279
Goodwill and Intangible Assets 1,971 2,049
--------------------
Total Assets 35,508 35,784
Liabilities & Equity
Current Liabilities 4,622 4,226
Long-term debt 594 1,067
--------------------
Total Liabilities 5,216 5,293
Capital stock 53,388 53,432
Stock-based compensation 2,497 2,088
Deficit (25,969) (24,510)
Foreign currency translation account (376) (519)
--------------------
Total Equity 30,292 30,491
--------------------
Total Liabilities & Equity 35,508 35,784
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Twelve Twelve
3 months 3 months months months
ended ended ended ended
Consolidated Statements of December December December December
Operations and Deficit 31, 2007 31, 2006 31, 2007 31, 2006
------------------------------------------
Sales 6,346 5,639 26,560 22,113
Operating Costs 5,004 4,281 19,819 16,601
Depreciation, depletion and
amortization 259 593 1,138 2,409
------------------------------------------
Gross Margin 1,083 766 5,603 3,103
------------------------------------------
G&A 1,690 1,488 6,247 6,085
Interest Income (122) (238) (797) (861)
Interest Expense 45 53 138 189
Stock based compensation 40 77 409 897
Development costs 180 93 164 227
Other Expenses/(income) (17) 19 500 391
------------------------------------------
Total 1,816 1,492 6,661 6,927
------------------------------------------
Loss before taxation &
Non-controlling interest (733) (727) (1,058) (3,824)
Taxes & Non-controlling loss 71 11 401 146
------------------------------------------
Loss for the period (804) (738) (1,459) (3,970)
------------------------------------------
Basic and diluted loss
per common share $(0.03) $(0.03) $(0.06) $(0.17)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Twelve Twelve
3 months 3 months months months
ended ended ended ended
Consolidated Statements of December December December December
Cash Flows 31, 2007 31, 2006 31, 2007 31, 2006
------------------------------------------
Cash flows from operating
activities (97) 139 1,096 (1,533)
Cash flows from investing
activities 1,509 (680) 6,265 (1,675)
Cash flows from financing
activities (245) (69) (572) (1,028)
Effect of exchange rate
on cash and cash
equivalents (246) (41) (65) (41)
------------------------------------------
Net increase (decrease) in
cash & ST Investments 921 (651) 6,724 (4,277)
------------------------------------------
Cash & ST Investments -
beginning of period 15,852 18,948 10,049 22,597
Cash & ST Investments -
end of period 16,773 18,321 16,773 18,321
-------------------------------------------------------------------------
-------------------------------------------------------------------------
All figures stated in U.S. dollars unless noted otherwise.