Novamerican Steel Reports 3rd Quarter Results
09/24/2007 - Novamerican Steel reports net income of $7.4 million on sales of $191.5 million for the third quarter, and net income of $22.6 million on sales of $591.1 million for the nine months ended August 25, 2007.
Novamerican Steel Inc. announced net income of $7.4 million on sales of $191.5 million for the third quarter, and net income of $22.6 million on sales of $591.1 million for the nine months ended August 25, 2007. (All amounts are in U.S. dollars).
Third Quarter Results—The $7.4 million net income ($0.70 ($0.70 after dilution) per share) reflects a $4.2-million (36.1%) decrease versus net income of $11.5 million ($1.10 ($1.10 after dilution) per share) for the same period in 2006. Sales of $191.5 million reflect a $19.8-million (9.4%) decrease from $211.3 million for the same period in 2006.
Tons sold and processed decreased by 72,925 tons (17.7%) to 338,738 tons from 411,663 in the third quarter of 2006. The gross margin decreased to 19.0% from 23.1% for the third quarter 2006.
During the quarter, the company incurred one-time, deal-related costs amounting to $1.1 million. Excluding the impact of these costs, EBITDA for the quarter was $14.8 million.
During the quarter, the company incurred one-time, deal-related costs amounting to $1.1 million. Excluding the impact of these costs, EBITDA for the quarter was $14.8 million.
Nine-Month Results—The $22.6 million net income ($2.16 ($2.16 after dilution) per share) reflects a $9.8-million (30.1%) decrease compared net income of $32.4 million ($3.12 per share ($3.11 after dilution)), for the first nine months of 2006. Sales decreased by $45.1 million (7.1%) to $591.1 million from $636.2 million for the same period in 2006.
Tons sold and processed decreased by 265,473 tons (19.7%) to 1,081,248 tons from 1,346,721 tons for the first nine months of 2006. The gross margin decreased to 19.1% from 22.0% for the same period in 2006.
Operations—The company experienced a relatively weak fiscal third quarter primarily from lower sales volumes due to longer-than-expected summer shutdowns (particularly in the automotive sector) and the continued industry-wide reductions of excess inventories. As a result, says the company, steel prices continued to decrease during the summer months, although not as quickly as in May and June. The resulting lower margins were partially offset by lower variable operating expenses and continued realization of cost-saving initiatives. Cash flow from operations was a positive source of approximately $19.1 million, including inventory reductions of approximately $7.9 million.
Outlook—Management believes that the bottom of the current steel price cycle occurred in August. The company says that recently announced price increases in steel coil and structural tubing should benefit the company in its fiscal fourth quarter.
Potential trade action relating to unfairly subsidized pipe imports from China is beginning to generate more buying interest in North American pipe and tube supply. Management also believes that weakness in the U.S. dollar will have a positive effect on U.S. exports, which should also help to increase demand for North American steel. In addition, the lower value of the U.S. dollar will make it more difficult for imported steel to be competitive in North America.
Update on Proposed Acquisition by Symmetry—The previously announced acquisition of Novamerican shares at $56.00 per share by way of plan of arrangement by Symmetry Holdings Inc. will require court approval as well as a vote by the Symmetry and Novamerican shareholders. Symmetry's proxy is currently under customary review by the U.S. Securities and Exchange Commission.
Update on Proposed Acquisition by Symmetry—The previously announced acquisition of Novamerican shares at $56.00 per share by way of plan of arrangement by Symmetry Holdings Inc. will require court approval as well as a vote by the Symmetry and Novamerican shareholders. Symmetry's proxy is currently under customary review by the U.S. Securities and Exchange Commission.
As Symmetry completes the SEC review process of the proxy, Novamerican will request an interim court order to (among other things) set the date of the special meeting of shareholders and mail the proxy materials required to approve the plan of arrangement. Although it is not possible at this time to determine the exact date of the shareholder meetings, management expects that the transaction will be completed in November 2007.
Based in Montreal, Canada, Novamerican Steel Inc. operates eleven locations in Canada and eleven locations in the United States to processes and distribute carbon steel, stainless steel and aluminum products, including carbon steel tubing for structural and automotive markets.
Based in Montreal, Canada, Novamerican Steel Inc. operates eleven locations in Canada and eleven locations in the United States to processes and distribute carbon steel, stainless steel and aluminum products, including carbon steel tubing for structural and automotive markets.
