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November 20, 2008


Novamerican Steel Q2 net sales up by 13.6%YoY

Novamerican Steel Inc announced the financial results for the Q2 ended May 31st 2008. The consolidated financial statements of Novamerican Steel Inc and its subsidiaries are included in the Quarterly Report on Form 10-Q for the quarter ended May 31, 2008, filed today with the Securities and Exchange Commission.

Novamerican Q2 results highlights

1. Net sales increased USD 28.9 million up by 13.6% to USD 241.3 million, as compared to USD 212.4 million in the pro forma second fiscal quarter of 2007.

2. Total tonnes increased by 2.4% to 401,300 tons as compared to 391,900 tons in the pro forma second fiscal quarter of 2007.

3. Direct sales tons increased by 2.5% to 232,400 of total tonnes as compared to 226,700 tonnes.

4. Gross margin increased 18.8% to USD 49.3 million or 20.4% of net sales as compared to USD 41.5 million or 19.5% of net sales, in the pro forma second fiscal quarter of 2007. The impact of exchange rates was an increase of USD 2.8 million. Excluding the impact of exchange rates, gross margin would have increased by USD 5.0 million to USD 46.5 million or 20.6% of net sales.

5. Operating expenses increased USD 15.9 million or 56.2% to USD 44.3 million as compared to USD 28.4 million in the pro forma second fiscal quarter of 2007. In addition to the USD 4.9 million restructuring charge, operating expenses included USD 3.5 million from higher depreciation and amortization associated with the purchase price allocation for fixed assets and other intangible assets, including accelerated depreciation on assets at Cambridge. The impact of exchange rates on operating expenses was an increase of USD 2.2 million. Excluding the impact of exchange rates, the restructuring charge and higher depreciation and amortization, operating expenses would have increased USD 5.3 million to USD 33.7 million.

6. Operating expenses included a restructuring charge of USD 4.9 million associated with the closure of the Cambridge, Ontario facility and the implementation of organizational changes in the replenishment, processing, distribution and sales processes. An additional restructuring charge of approximately USD 3.0 million is anticipated in the third fiscal quarter of 2008. These changes will result in approximately USD 10.0 million, net, in annual operating expense reduction, with that resulting run rate realized by end of 2008.

7. Adjusted EBITDA decreased by USD 1.7 million or 9.4%to USD 16.3 million as compared to USD 18.0 million in the pro forma second fiscal quarter of 2007.

8. Long term debt at May 31st 2008 was USD 399.8 million and cash and cash equivalents were USD 12.4 million.

Mr Corrado De Gasperis CEO of Novamerican said that "Our second fiscal quarter of 2008 continued experiencing positive momentum throughout the quarter from improved shipments and pricing, mitigated by an extremely weak automotive sector, including for us, the negative impact of the American Axle strike on General Motors. Our direct sales tons and revenue were lower than previously anticipated by about 38,000 tons. We implemented a significant portion of our organizational changes during the second quarter, including the closure of our Cambridge, Ontario facility. We anticipate having substantially all of our organizational changes concluded by the end of the third fiscal quarter, including new agreements with our supply-side trading partners. We incurred approximately $1.0 million in the 2008 second fiscal quarter for operating expenses for training, development and recruiting associated with this effort."