Highlights of the Quarter
(unless other noted, all financial amounts in this news release are expressed in U.S. dollars)
- Beralcast™ Defense Sector Shipments Accelerating: Shipments of the Company’s Beralcast™ products to a defense-sector customer in the second fiscal quarter of 2019 (ending December 31, 2018) rose by more than 60%, as product shipments that were delayed in fiscal Q1 of 2018 resumed in fiscal Q2 and are continuing at an accelerated pace.
- Capital Improvement Projects: More than a dozen capital improvement projects are in operation or are in the final stages of implemention. These upgrades are designed to increase production capacity, improve operational efficiencies, expand IBC’s product offering, and improve gross margins.
- Lower Sales in the Quarter: Sales in the quarter were $3.9 million, which compares to sales in the prior-year period of $4.7 million. This change was due to the following: reduced demand for copper alloy products, a trend seen across the industry; lower copper commodity prices, which can impact IBC revenues, and; a seasonal dip in demand for investment cast beryllium-aluminum (Beralcast™) products for certain non-defense applications. In 2019, demand for both copper alloys and non-defense Beralcast™ products has begun to rebound.
- Fiscal Q2 Results: IBC incurred a comprehensive loss of $1.1 million for the quarter, or (0.03) per share, as compared to a loss of $402,000, or (0.01) per share, in the prior-year period. Operating loss1 for the quarter was $915,000, which compares to an operating loss in the comparable quarter of fiscal 2018 of $301,000.
FRANKLIN, Ind., Feb. 28, 2019 (GLOBE NEWSWIRE) -- IBC Advanced Alloys Corp. (“IBC” or the “Company”) (TSX-V: IB; OTCQB: IAALF) today announced its financial results for its fiscal second quarter of 2019.
The Company also announced that Mark A. Smith, IBC’s Board Chairman, will host a conference call and investor webcast on Wednesday, March 6, 2019, at 10 a.m. Eastern to discuss IBC’s future growth strategies. Details on the call are shown below.
QUARTERLY RESULTS SUMMARY
In the quarter, IBC posted a comprehensive loss (net of tax) of $1.1 million for the quarter, or (0.03) per share, as compared to a loss of $402,000, or 0.01 per share, in the year-ago period. Operating loss for the quarter was $915,000, which compares to an operating loss in the comparable quarter of fiscal 2018 of $301,000.
Shipments of the Company’s Beralcast™ products to defense-sector customers rose in the quarter by more than 60%, as product shipments that were delayed in fiscal Q1 of 2019 resumed in Q2 and are continuing at an accelerated pace. This was offset by reduced demand in the second fiscal quarter for commercial (non-defense) Beralcast™ products, which is typical of seasonal buying patterns for these products.
Sales of commercial Beralcast™ products are expected to strengthen in the second half of the current fiscal year. On a trailing 12-month basis, sales of commercial Beralcast™ products are up 16% over the prior 12-month period.
In the Copper Alloys division, sales were lower by 20% compared to the prior-year period, due to a softening of demand that impacted much of the industry. Copper prices also were lower in the quarter, which impacted IBC’s revenues. However, in 2019, demand for copper alloys products has begun to show signs of strengthening.
Lower sales revenue in the first and second fiscal quarters of 2019 have led to changes in the Company’s sales forecast for FY 2019. While demand for copper alloy and commercial Beralcast™ products is expected to improve in the second half of FY 2019, the Company believes that it will not achieve profitability for fiscal year 2019, as was previously forecast. The Company remains encouraged by increases in production capabilities, output capacity, efficiencies, and gross margins that are expected to result from the its capital improvements program, and it believes that these capital improvements will play a key role in IBC achieving profitability.
“Defense-related beryllium alloy product shipments rose sharply in the fiscal second quarter, as our team accelerated shipments that were delayed from the preceding quarter,” said Mark A. Smith, IBC’s Board Chairman. “Demand is also picking up now for our non-defense Beralcast™ products, following the seasonal dip we experienced in fiscal Q2, and that is very good to see. We also are seeing a strengthening of demand for copper alloy products in 2019, after reduced orders that we and others in the industry experienced in fiscal Q2.”
“The Board and I are excited to see the many new capital improvements we are bringing into operation in both Copper Alloys and Engineered Materials, as these are expected to increase production capacity, grow sales, improve efficiencies, cut costs, expand our product offering, and fuel margin growth across IBC,” Mr. Smith added.
IBC CAPITAL IMPROVEMENTS PROGRAM
The majority of IBC’s planned capital improvements have now been completed or are in the final stages of installation and/or implementation across both the Copper Alloy and Engineered Materials divisions.
Copper Division Capital Project Examples:
- A CNC vertical lathe, which allows IBC to produce a broader array of products needing higher tolerances. This device also is expected to increase margins on current products by reducing labor cost and run time.
- A new bridge mill, which expands the Company’s capability to perform precision milling and drilling on larger components, and is expected to improve margins on existing large plate products with increased programable cutting efficiency and capacity.
- A new manipulator, which increases reliability and provides additional material handling capacity to production operations.
Engineered Materials Division Capital Project Examples:
- A dewax furnace, which will enable the Company to bring in-house a key step in the beryllium-aluminum alloy manufacturing process that was previously done by outside contractors. The furnace is expected to help improve margins, increase throughput, and strengthen product quality assurance.
- An upgraded wax injection system, which is designed to help the Company more efficiently produce molds for products and product assemblies.
- An upgraded power backup system, which is expected to minimize downtime in manufacturing processes.
IBC CONFERENCE CALL AND INVESTOR WEBCAST
Mark A. Smith, IBC Board Chairman, will host a conference call and webcast on Wednesday, March 6, 2019, at 10 a.m. Eastern to discuss the Company's future growth strategies. To register for the webinar and conference call, and receive instructions on how to call in or connect via the internet to the webinar, please go here. A recording of the webcast will be made available on the IBC website following the event.
FISCAL Q2-2019 SEGMENT AND CONSOLIDATED OPERATIONS RESULTS
| Three Months Ended | Three Months Ended | |||||||||||||||||
| December 31, 2018 | December 31, 2017 | |||||||||||||||||
| Copper | EMC | Corp. | Consol. | Copper | EMC | Corp. | Consol. | |||||||||||
| Alloys | Alloys | |||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||
| Sales | 2,727 | 1,177 | - | 3,904 | 3,393 | 1,335 | - | 4,728 | ||||||||||
| Cost of sales | ||||||||||||||||||
| Materials | 1,498 | 40 | - | 1,538 | 1,723 | 331 | - | 2,054 | ||||||||||
| Labor | 576 | 434 | - | 1,010 | 557 | 304 | - | 861 | ||||||||||
| Subcontract | 47 | 78 | - | 125 | 24 | 47 | - | 71 | ||||||||||
| Overhead | 503 | 402 | - | 905 | 533 | 440 | - | 973 | ||||||||||
| Depreciation | 98 | 86 | - | 184 | 101 | 99 | - | 200 | ||||||||||
| Change in | ||||||||||||||||||
| finished goods | (45 | ) | (38 | ) | - | (83 | ) | 5 | 56 | - | 61 | |||||||
| 2,677 | 1,002 | - | 3,679 | 2,943 | 1,277 | - | 4,220 | |||||||||||
| Gross profit (loss) | 50 | 175 | - | 225 | 450 | 58 | - | 508 | ||||||||||
| SG&A expenses | 524 | 326 | 290 | 1,140 | 440 | 211 | 158 | 809 | ||||||||||
| Operating | ||||||||||||||||||
| income (loss) | (474 | ) | (151 | ) | (290 | ) | (915 | ) | 10 | (153 | ) | (158 | ) | (301 | ) | |||
| Gross margin | 2 | % | 15 | % | - | 6 | % | 13 | % | 4 | % | - | 11 | % | ||||
The Company’s interim financial statements have been filed on SEDAR at www.sedar.ca and are available on the Company’s website at www.ibcadvancedalloys.com.
NON-IFRS MEASURES
To supplement its consolidated financial statements, which are prepared and presented in accordance with IFRS, IBC uses “operating income (loss)”, which is a non-IFRS financial measure. IBC believes that operating income helps identify underlying trends in its business that could otherwise be distorted by the effect of certain income or expenses that IBC includes in loss for the period. IBC further believes that operating income (loss) provides useful information about core operating results, enhances the overall understanding of its past performance and future prospects and allows for greater visibility with respect to key metrics used by management in its financial and operational decision-making. Operating income (loss) should not be considered in isolation or construed as an alternative to loss for the period or any other measure of performance or as an indicator of IBC’s operating performance. Operating income (loss) presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data.
Operating income (loss) represents loss for the period, excluding foreign exchange loss, interest expense, interest income, other income (expense), and income taxes that IBC does not believe are reflective of the core operating performance during the periods presented.
Operating income (loss)
A reconciliation of the loss for the three and six months ended December 31, 2018 and 2017 to operating income follows:
| Quarter ended December 31 | 2018 | 2017 | ||||||
| $ | $ | |||||||
| Loss for the period | (1,088 | ) | (402 | ) | ||||
| Foreign exchange (gain) loss | (33 | ) | 36 | |||||
| Interest expense | 214 | 57 | ||||||
| Loss on disposal of assets | - | - | ||||||
| Interest income | (3 | ) | - | |||||
| Other income | (5 | ) | (1 | ) | ||||
| Arbitration award liability | - | - | ||||||
| Income taxes | - | 9 | ||||||
| Operating loss | (915 | ) | (301 | ) | ||||
A reconciliation of year to date loss to operating income follows:
| Six months ended December 31 | 2018 | 2017 | ||||||
| $ | $ | |||||||
| Loss for the period | (1,854 | ) | (1,004 | ) | ||||
| Foreign exchange (gain) loss | (37 | ) | 46 | |||||
| Interest expense | 497 | 114 | ||||||
| Loss on disposal of assets | - | - | ||||||
| Interest income | (7 | ) | (1 | ) | ||||
| Other income | (7 | ) | (3 | ) | ||||
| Arbitration award liability | - | - | ||||||
| Income taxes | 3 | 12 | ||||||
| Operating loss | (1,405 | ) | (836 | ) |
On behalf of the Board of Directors:
"Mark A. Smith”
Chairman, Board of Directors
CONTACTS:
Mark. A. Smith, Chairman, Board of Directors
Jim Sims, Investor and Public Relations
IBC Advanced Alloys Corp.
+1 (303) 503-6203
Email: jim.sims@ibcadvancedalloys.com
Website: www.ibcadvancedalloys.com
@IBCAdvanced $IB $IAALF
ABOUT IBC ADVANCED ALLOYS CORP.
IBC is a leading beryllium and copper advanced alloys company serving a variety of industries such as defense, aerospace, automotive, telecommunications, precision manufacturing, and others. IBC's Copper Division manufactures and distributes a variety of copper alloys as castings and forgings, including beryllium copper, chrome copper, and aluminum bronze. IBC's Engineered Materials Division makes the Beralcast® family of alloys, which can be precision cast and are used in an increasing number of defense, aerospace, and other systems, including the F-35 Joint Strike Fighter. IBC's has production facilities in Indiana, Massachusetts, Pennsylvania, and Missouri. The Company's common shares are traded on the TSX Venture Exchange under the symbol "IB" and the OTCQB under the symbol "IAALF".
CAUTIONARY STATEMENTS
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. This disclosure contains forward-looking statements. Forward-looking statements normally contain words like ‘believe’, ‘expect’, ‘anticipate’, ‘plan’, ‘intend’, ‘continue’, ‘estimate’, ‘may’, ‘will’, ‘should’, ‘ongoing’ and similar expressions, and within this news release include any statements (express or implied) respecting anticipated seasonality in the next quarter or two that may impact sales trends, expectations as to further value and savings of waste stream inventory, expectations as to additional quantities to be sold under the Lockheed Martin contract, beliefs as to expanding production capacity as a result of the purchase of new capital equipment and inventory and the success and timing of the production of components under the commercial satellite systems contract. Although IBC believes that the expectations reflected in these forward-looking statement are reasonable, forward-looking statements, by their very nature, are subject to inherent risks and uncertainties and are based on assumptions, both general and specific, which give rise to the possibility that actual results or events could differ materially from our expectations expressed in or implied by such forward-looking statement. The forward looking statements made by the Company in this press release are based on its experience, perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. As a result, we cannot guarantee that any forward-looking statement will materialize and we caution you against relying on any of these forward-looking statements. IBC makes no commitment to revise or update any forward-looking statements in order to reflect events or circumstances after the date any such statement is made, except as required by applicable law. Additional information identifying risks and uncertainties is contained in IBC’s filings for the quarter ended December 31, 2018, and in its Annual Information Form for the fiscal year ended June 30, 2018, available at www.sedar.com.
1 IBC reports non-IFRS measures such as "operating operating income (loss).” Please see information on this and other non-IFRS measures in the "Non-IFRS Measures" section of this new release and in the Company’s Management Discussion and Analysis (“MD&A”), available on IBC’s website at www.ibcadvancedalloys.com and on SEDAR at www.sedar.com.