Company

Carmanah Reports Second Quarter 2012 Results

Delayed contract awards impact quarter

 

VICTORIA, BC, CANADA (August 14, 2012) Carmanah Technologies Corporation (TSX: CMH) (“the Company” or “Carmanah”) today reported its second quarter results for the period ended June 30, 2012.  

For the three months ended June 30, 2012, the Company recorded a net loss of $1.5 million on revenues of $6.1 million.  Total second quarter 2012 revenues were down $4.6 million over the same period in 2011.  The net loss is primarily driven by lower revenues in the first half of 2012.       
 
“The quarter demonstrated marginal improvement versus prior quarter,” stated Bruce Cousins, Chief Executive Officer. “However, we remain disappointed with performance levels overall.  The Grid Tie business has developed a backlog as a result of the Ontario FIT program changes having recently been announced, however given project cycle times for completion, this was not converted to revenues in the quarter. In addition, demand continues to be soft in several other verticals, with a notable absence of any large projects closed during the quarter. Our pipeline remains meaningful and our emphasis is on closing transactions.”  
 
Financial Condition at June 30, 2012 compared to December 31, 2011
  • Cash and cash equivalents of $3.1 million, down $1.8 million from $4.9 million
  • Working capital of $5.6 million, down $2.2 million from $7.8 million
  • Continued debt-free operations
Second quarter 2012 compared to second quarter 2011
  • Revenues: $6.1 million, down $4.6 million from $10.7 million
  • Gross margin: 29.1%, down from 30.6%
  • Operating costs: $3.2 million, approximately even
  • Net loss: $(1.5) million net loss, up $1.3 million from a net loss of $(0.2) million
  • Adjusted EBITDA (a non-IFRS measure): negative $1.1 million, down $1.7 million from positive $0.6 million
Summary of operations
  • Revenues for the second quarter of 2012 were $6.1 million, down $4.6 million from $10.7 million in the second quarter of 2011. By product sector, revenues are as follows:
    • Signals, $2.9 million, down from $4.5 million
    • Outdoor Lighting, $0.9 million, down from $1.2 million
    • Grid-tie, $0.6 million, down from $3.7 million
    • Mobile, $1.7 million, up from $1.3 million
  • Gross margin percentages for the second quarter of 2012 were 29.1%, down from 30.6% in quarter 2 2011.  The decrease was primarily driven by (1) some price discounting in our Outdoor Lighting segment in an effort to break into new markets, and (2) price adjustments in our Marine segment in response to competitive activity.  Broken down by product sector, gross margin percentages are as follows:
    • Signals, 36.3% down from 39.5%
    • Outdoor Lighting, 18.0% down from 27.2%
    • Grid-tie, 11.5% down from 20.9%
    • Mobile, 29.3% down from 30.9%
Our operational & business highlights year to date in 2012 include the following items.
  • Negotiated and signed two long term exclusive cooperation agreements to enhance our portfolio and strengthen our network of strategic partnerships with the following companies:
    • Sabik Oy (“Sabik”), our marine signalling partner based in Finland which we have worked with over the past few years.  The five year agreement expands on our previous two year sales and marketing collaborations to include a deeper integration of joint product development. 
    • Laser Guidance Inc., a US based pioneer in aviation precision guidance systems. The agreement provides us with a five year exclusive world-wide marketing license for a portfolio of Laser Guidance aviation navigation aids. 
  • Strengthened our distribution channel through the addition of new partners in key markets including Best Light in Mexico and Al-Babtain in Saudi Arabia for our Outdoor Lighting market. 
  • Embarked on major development efforts for our signalling products which will see a variety of new products launched this year, most significantly a new state of the art Marine signal lantern to replace our 700 series lights and a new Traffic signalling device, the rectangular rapid flashing beacon (“RRFB”) that improves crosswalk safety. 
  • Negotiated a number of major sales contracts, including 3 grid-tie projects worth $2.4 million.  We also signed a $10 million non-binding letter of agreement with one of our South American distributors to procure, commission and install various aids to navigation on a major South America waterway.  This agreement is subject to finalization of certain conditions with the end customer and we expect this should be completed in the near term.  
  • Expanded our focus on revenue growth with the hiring of an additional five sales employees to complement our new vertical orientated sales structure. Under this new structure, each market vertical has its own leadership and supporting team and is directly responsible for driving the planning, development and execution within the market.
  • Initiated a non-brokered private placement to raise up to CDN$4 million in cash to fortify our treasury. 
Reporting Currency and Accounting Standards
Unless otherwise indicated, all financial information presented in this press release is in US dollars and has been prepared in accordance with International Financial Reporting Standards (“IFRS”).
 
Adjusted EBITDA
Adjusted EBITDA reconciliation
Three months ended June 30
Six months ended June 30
(US$ in thousands)
2012
2011
2012
2011
 
 
 
 
 
Net loss
(1,451)
(174)
(2,362)
(16)
Add/(deduct):
 
 
 
 
  Interest
-
-
-
4
  Income tax expense/(recovery)
-
54
-
157
  Amortization
288
259
565
534
EBITDA*
(1,163)
139
(1,797)
679
  Terminated Lightech agreement costs
-
88
-
184
  Retirement provision
-
290
-
290
  Non-cash stock based compensation
90
116
151
173
Adjusted EBITDA*
(1,073)
633
(1,646)
1,326
* A Non-IFRS measure
 
Management believes that the non-IFRS measures presented provide useful information by excluding certain items that may not be indicative of Carmanah’s core operating results and that this non-IFRS measure will allow for a better evaluation of the operating performance of the Company’s business and facilitate meaningful comparison of results in the current period to those in prior periods as well as future periods. Reference to this non-IFRS measure should not be considered as a substitute for results that are presented in a manner consistent with IFRS. This non-IFRS measure is provided to enhance investors’ overall understanding of Carmanah’s current financial performance.
 
A limitation of utilizing this non-IFRS measure is that the IFRS accounting effects of the non-recurring items do in fact reflect the underlying financial results of Carmanah’ s business and these effects should not be ignored in evaluating and analyzing Carmanah’ s financial results. Therefore, management believes that Carmanah’s IFRS measures of net loss and the same respective non-IFRS measure should be considered together.  
 
Non-IFRS measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. One such non-IFRS measure used by management for assessing financial performance is Adjusted EBITDA, defined as net income before interest, income taxes, amortization, non-cash stock-based compensation, and terminated Lightech agreement costs.
 
 
Complete set of Financial Statements and Management Discussion & Analysis
 
A complete set of the second quarter ended June 30, 2012 Financial Statements and Management’s Discussion & Analysis are available on Carmanah’s corporate website.
 
To view these documents, visit www.carmanah.com/Company/Investors/Financial_Reports.aspx. Both documents will also be filed on SEDAR (www.sedar.com).
 
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About Carmanah Technologies Corporation
As one of the most trusted names in solar technology, Carmanah has earned a reputation for delivering strong and effective products for industrial applications worldwide. Industry proven to perform reliably in some of the world's harshest environments, Carmanah solar LED lights and solar power systems provide a durable, dependable and cost effective energy alternative. Carmanah pursues its business strategy within six distinctive product offerings: outdoor lighting, marine signal, aviation signals, traffic signals, grid-tie and mobile. Carmanah is actively seeking additional product sales opportunities to add to its top line revenue, as well as extending existing product lines through internal development efforts, strategic business relationships as well as focused acquisitions.  Carmanah is a publicly traded company, with common shares listed on the Toronto Stock Exchange under the symbol "CMH”. For more information, visit www.carmanah.com.
 
For further information:
Investors:
Investor Relations: Roland Sartorius, CFO
Toll-Free:  1.877.722.8877
Media:
Public Relations: David Davies
Tel:  +1.250.382.4332
This release may contain forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as “expects,” “plans,” “estimates,” “intends,” “believes,” “could,” “might,” “will” or variations of such words and phrases. Forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of Carmanah to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. These statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties. For additional information on these risks and uncertainties, see Carmanah’ s most recently filed Annual Information Form (AIF) and Annual MD&A, which are available on SEDAR at www.sedar.com and on the Company’s website at www.carmanah.com. The risk factors identified in Carmanah’ s AIF and MD&A are not intended to represent a complete list of factors that could affect Carmanah. Accordingly, readers should not place undue reliance on forward-looking statements. Carmanah does not assume any obligation to update the forward-looking information contained in this press release.