Winalta Inc. Reports Third Quarter Fiscal 2009 Results
Winalta Inc. (Winalta) today announced financial results for its fiscal 2009 third quarter ended July 31, 2009. The Company reports a net loss of $5.4 million on revenues of $13.3 million ($0.15 loss per share fully diluted) for the three months ended July 2009 compared to net earnings of $2.1 million on revenues of $26.8 million ($0.06 per share fully diluted) in 2008. EBITDA for the three months ended July 31, 2009 was negative $2.3 million relative to $6.0 million in 2008.
Winalta's decreased revenue and net loss for the third quarter 2009 are reflective of the following:
- A negative 27% gross margin in manufacturing, due to very limited production that did not cover the direct and overhead costs, was a significant factor in the decreased consolidated gross margins of 5% for Q3 2009.
- Homes retail sales where up 53% third quarter 2009 over the same quarter 2008 but did not compensate for the $13 million in revenue that came from Winalta’s Fort McMurray community completed in 2008.
- A 37% decrease in Industrial revenue as utilization of construction and oilfield equipment dropped with slower energy service activity in western Canada.
- General and administrative cost reductions of $0.8 million for the quarter that did not reflect the total cost reduction implemented to date due to lingering commitments made in prior periods. Future quarters will continue to show decreased general and administrative expenses.
Winalta continues to meet its current debt repayment obligations and since July 31, 2009, has been successful in reducing its overall debt by approximately $5.0 million from the combination of cash flow from operations and cash proceeds from the sale of assets. However, for the three and nine months ended July 31, 2009, the Company has experienced declines in revenue of 50% and 55% respectively, with resulting net losses from continuing operations of $5.1 million and $10.5 million. In addition, the Company is currently in ongoing discussions with its primary lender as to the renewal of its operating credit facility agreement which expired on August 31, 2009. The Company has shared its plan to service and further reduce its debt with its lenders and continues to execute on this plan which includes the selling of non-core assets in order to fund operations and meet obligations as they come due.
Ron Berg, who assumed the role of President and CEO of Winalta Inc. on April 30, 2009. commented: “Winalta’s primary objective continues to be the reduction of general and administrative expenses to bring them inline with current reduced revenue levels. There have been significant reductions to date and further reductions to come as the viability of different business lines are addressed. These cost reduction measures along with the sales of non-revenue generating assets, will drive debt reduction and a return to profitability over time.”.
| Three Months Ended July 31, 2009 | ||
| 2009 | 2008(1) | |
| Revenue | $13,268 | $26,764 |
| Gross profit | $664 | $9,806 |
| Gross profit % | 5% | 37% |
| Net earnings (loss) | $(5,377) | $2,062 |
| Earnings (loss) per share | $(0.15) | $0.06 |
| EBITDA | $(2,295) | $6,200 |
| EBITDA per share | $(0.06) | $0.17 |
| Three Months Ended July 31, 2009 | ||||||
| Homes | Industrial | |||||
| 2009 | 2008(1) | 2009 | 2008(1) | |||
| Revenue | $7,065 | $18,083 | $6,188 | $9,865 | ||
| Gross profit | $921 | $5,219 | $2,047 | $4,573 | ||
| Gross profit % | 13% | 29% | 33% | 46% | ||
(1) Comparative results for 2008 have been adjusted from previous reported results to be consistent with the current period for certain reclassification of management overhead costs and earnings from discontinued operations |
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The net loss for the third quarter of $5.4 million relative to net earnings of $2.1 million in 2008 is the result of reduced overall construction and community revenue together with reduced gross profit margins. The net loss for the period results from high general and administrative costs relative to the reduced volume of revenue.
The consolidated general and administrative expenses of $3.0 million for the third quarter of 2009 reflect a $0.8 million reduction over the third quarter of 2008. While savings initiatives are generating results in certain areas, other costs increased slightly as to commitments made in prior periods. As a result of ongoing staff reductions, management and administrative salaries have decreased by approximately $500,000 for the three months ended July 31, 2009 as compared to the third quarter of 2008. Management and administrative salaries are continuing to be addressed and fourth quarter and first quarter of 2010 will see further reductions.
Homes division gross profit margins of 13% on revenue of $7.1 million for the three months ended July 31, 2009 are significantly lower than the 29% gross profit margins on $18.1 million of revenue for the three months ended July 31, 2008, due to reduced joint venture revenue and continued pressure on selling prices against increased delivery and setup costs. The revenue from retail home deliveries during the third quarter of 2009 is 53% higher than the third quarter of 2008. Sales activity remains high resulting in a backlog of sold homes to be delivered through the remainder of the year.
Company currently has approximately $1.8 million of homes sold and waiting on delivery over the next few months, together with an additional $2.0 million of home deals written and deposits taken, again for delivery dates through the remainder of the year. The supply of finished homes excluding display homes as at July 31, 2009 is carried at a cost of $15.9 million, a reduction from $19.1 million at the beginning of the quarter as compared to April 30, 2009.
The Homes division is actively pursuing a number of strategic customer relationships in order to sell homes in communities and subdivisions owned by third parties. The renewed focus on factory built traditional bungalow and villa style homes is another key initiative bringing several potential sales opportunities.
The Industrial Division’s overall gross profit margin of 33% on $6.2 million of revenue for the three months ended July 31, 2009 is reflective of reduced levels of oilfield rental activity combined with a lower level of activity and reduced margins in the construction operations. The Industrial Division achieved 38% gross profit margin on $9.9 million of revenue for the same period of 2008. The general decrease in oilfield drilling and service related activity resulted in lower than expected revenue from this division at reduced gross profit margins. Reduced activity levels in the oil and gas industry translated into a very slow quarter for the Company’s Industrial Division. Oilfield rentals gross profit of $0.9 million for the third quarter of 2009 is reflective of a 19% decrease in revenue over the same period in 2008. Construction division revenue for the second quarter of 2009 of $5.0 million was 40% lower than the same quarter in 2008, resulting from the decreased overall activity in the oil and gas construction industry. Gross profit margin for the three months ended July 31, 2009 was 23% as compared with 31% in 2008. The paving group was busy during the third quarter, but under increased cost pressure resulting in reduced profit margins.
Additional information and Management's Discussion and Analysis are available on SEDAR (www.sedar.com).
Winalta Inc. is an integrated company with three main operating divisions, Homes, Industrial, and Manufacturing. The Homes Division sells CSA approved homes via retail centers, communities and supply arrangements. The Industrial Division leases portable industrial accommodations and provides construction services that include excavating, aggregate trucking and paving. The Manufacturing Division builds CSA approved homes and portable industrial accommodations from facilities near Spruce Grove, Alberta.
Winalta Inc. shares trade on the TSX Venture Exchange under the symbol "WTA.A".
The TSX Venture Exchange has neither approved nor disapproved the contents of this news release. The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.
The words "believe", "expect", "intend", "anticipate", or any variation of such words and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this news release. Winalta undertakes no obligation to publicly update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except as required by securities laws.
For further information
Business Contact
Ron Berg, President & CEO, Winalta Inc.,
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Tel: (780) 960-6900 Fax: (780) 962-9523
www.winaltainc.com
Austin Fraser, VP Corporate Development and Investor Relations
Tel: (403) 475-4698
