Winnipeg, Manitoba, November 18, 2008 – Empire Industries Ltd. (TSX-V: EIL) (“Empire” or the “Company”), a manufacturer of specialized engineered products and provider of steel fabrication and installation services, today announced its unaudited consolidated financial results for its third quarter ended September 30, 2008. The unaudited consolidated financial statements and Management’s Discussion and Analysis for the third quarter are available on Empire’s website at www.empind.com and have been filed on SEDAR.
Third Quarter Highlights:
– Revenue of $57.4 million, an increase of 108% from Q3 2007;
– Gross profit of $8.1 million, an increase of 55% from Q3 2007;
– Operating income of $2.5 million, a decrease of 5% from Q3 2007;
– Net Income of $0.5 million ($0.01 per share), compared to earnings of $0.7 million ($0.01 per share) for the third quarter of 2007;
– Backlog of $92 million at the end of the third quarter, down from $110 million at June 30, 2008;
– Creation of strategic partnership with the Athabasca Chipewyan First Nation Holding Corporation (“ACFN”) on July 31, 2008 in joint ownership of Sorge’s Welding Ltd. and jointly acquired Lemax Machine & Welding subsequent to quarter end on November 1, 2008.
“Our acquisition strategy over the past thirty months has translated into substantial year-over-year top line growth,” said Guy Nelson, Chairman and Chief Executive Officer, Empire Industries Ltd. “As expected, our third quarter financial results were stronger than those for the first two quarters of this year with our post-acquisition, integration initiatives having largely been completed during the second quarter. Sales of engineered products to the domestic and international oil and gas industry were very strong in the quarter adding positively to the bottom line. The steel fabrication group also had good activity levels in its shops and its field construction crews were reasonably active, albeit with jobs that have seen their margins erode because of material and labour cost increases.”
Mr. Nelson continued: “During the quarter, we began to strengthen our position in the Ft. McMurray maintenance market through our innovative Aboriginal partnership and our joint ownership of Sorge’s Welding. We added to this strength, when subsequent to quarter end, Empire and ACFN jointly acquired Lemax Machine & Welding. Our Aboriginal partnership and our joint ownership in both Sorge’s Welding and Lemax Machine & Welding increase our participation in one of the most robust industrial maintenance and service markets in North America.”
Financial Results
Revenue increased 108% to $57.4 million for the third quarter and 71% to $139.6 million for the year-to-date compared to the same periods a year earlier. Revenue increases were driven largely by the acquisitions of Dynamic Structures and KWH Constructors during the second quarter of last year and of Tornado Technologies during the fourth quarter of last year.
Gross profit for the quarter was $8.1 million (14.2% of revenue) compared with $5.2 million (19.0% of revenue) for the third quarter of last year. For the year-to-date, gross profit was $21.2 million (15.2% of revenue) compared with $14.9 million (18.3% of revenue) for the same period last year. The lower gross margin as a percent to revenue was a function of a different mix of business and higher material and labour costs in 2008 compared to 2007.
Net income for the third quarter was $0.5 million, or $0.01 per share, compared to net income of $0.7 million, or $0.01 per share, for the third quarter of 2007. For the year-to-date, net income was $0.5 million, or $0.01 per share, compared to $2.4 million, or $.04 per share, for the same period in 2007.
Net Income per share for the third quarter is based on a weighted average of 91.8 million common shares outstanding during the quarter compared to 59.9 million for the third quarter of 2007.
Outlook
“Despite the current economic environment, there continue to be significant market opportunities in Western Canada for both our engineered products and steel fabrication groups,” said Mr. Nelson. “However, the concern we have looking forward is that the capital projects that we have been actively bidding on in Western Canada, and in select growth markets internationally, are now subject to much tighter debt and equity markets and are in the context of a lower commodity price environment. This in turn has delayed the conversion of our record bidding activity into contracted backlog. It has also delayed the construction, and conversion into revenue, of our previously announced $11 million contract with Suncor by approximately nine months. We remain cautiously optimistic that project delays will end sooner in Western Canada than in other parts of the world, but at the same time because of the current economic conditions and the reduction of our backlog in the third quarter, we will be reviewing all aspects of our operations to ensure we are responsive to these delays. With our strategic, diversified positioning in growth markets and our proprietary products, which are in demand in specific export markets niches, we are confident we will weather the current global economic storm.”
