MONTREAL, Feb. 11, 2008 (Press Release) - GLV Inc. ("GLV" or "the Company") discloses today the financial results and highlights of the third quarter of fiscal 2008. This period gave rise to solid growth in the Company's consolidated revenues — to which both groups contributed almost equally — coupled with an improvement in each group's operational profitability over the same period a year earlier. It should be pointed out that consolidated results for the third quarter ended December 31, 2007 reflect GLV's actual results, whereas those for the comparative three-month period ended December 31, 2006 consist of the unaudited combined carve-out results of the retained businesses pursuant to the Arrangement ("the Arrangement") closed on August 10, 2007. For the first nine months ended December 31, 2007, consolidated and combined carve-out results include GLV's actual results only for the period extending from August 9, 2007 to December 31, 2007; prior to August 9, 2007, they consist of the combined carve-out results of the retained businesses.
Results for the Three-Month and Nine-Month Periods ended December 31, 2007
For the three-month period ended December 31, 2007, GLV's consolidated revenues amounted to $137.7 M, up 23.2% over combined carve-out revenues of $111.8 M for the same quarter a year earlier. Excluding the unfavourable impact of currency fluctuations, GLV's third-quarter revenues posted a 36.4% increase. This performance was in a large part driven by organic growth of 21.8% (at constant exchange rates), primarily attributable to the Water Treatment Group. Despite the negative impact of exchange rate fluctuations, normalized EBITDA (earnings before amortization, financial expenses, income taxes, gains or losses on disposal of property, plant and equipment and other assets and before non-recurring costs directly related to the Arrangement) more than tripled, to stand at $7.0 M in the third quarter. GLV closed the three-month period with consolidated normalized net earnings of $1.6 M or $0.06 per share, as opposed to a combined carve-out normalized net loss of $0.5 M or $(0.02) per share in the same quarter the previous year. This turnaround in profitability is all the more significant as results for the third quarter of the current fiscal year include a pre-tax unrealized loss of $1.3 M on derivative financial instruments, compared with an unrealized gain of $0.6 M a year earlier.
For the nine-month period ended December 31, 2007, GLV recorded consolidated and combined carveout revenues of $378.8 M, compared with combined carve-out revenues of $290.2 M the previous year, which represents a 30.5% increase (36.3% increase at constant exchange rates). While largely attributable to the acquisitions made during the previous year, the revenue increase also stemmed from organic growth of 8.6% (at constant exchange rates). GLV achieved consolidated and combined carveout normalized EBITDA(1) of $16.4 M, up 58.5% over the same period in 2006 (72.3% increase at constant exchange rates). The Company posted year-to-date consolidated and combined carve-out normalized net earnings of $2.3 M or $0.09 per share, compared with $2.4 M or $0.10 per share the previous year. For the nine-month period, the unrealized loss on derivative financial instruments amounted to $0.8 M, as opposed to an unrealized gain of $1.2 M a year earlier. In addition, GLV assumed a $1.6 M pre-tax increase in amortization of intangible assets, mostly due to the Enviroquip and Copa acquisitions, although this factor had no impact on third-quarter results.
For information purposes, non-recurring costs directly related to the Arrangement amounted to $0.5 M for the third quarter and to $6.3 M for the first nine months of fiscal 2008.
Water Treatment Group: Strong Organic Revenue Growth, Largely Attributable to Enviroquip, and Improved Profitability
The Water Treatment Group posted a 23.4% increase in its third-quarter revenues (38.4% increase excluding the unfavourable impact of currency fluctuations), mostly fostered by organic growth of 33.9% (at constant exchange rates). This performance is largely attributable to the Enviroquip division, which continues to benefit from strong demand for most of its products in the North American municipal market. This unit's results have generally exceeded management's expectations since its acquisition in June 2006. Other businesses acquired during the previous two years, especially Brackett Green and Copa, are also contributing to the Water Treatment Group's growth in Europe, North America and worldwide. In addition, their profitability has been gradually improving since GLV finalized the integration of the Water Treatment Group's European organization.
The group's revenue growth contributed to a $3.1 M increase in its third-quarter normalized EBITDA, which amounted to $3.7 M. The normalized EBITDA margin as a percentage of revenues thus stood at 5.4% compared with 1.0% the previous year, when the Water Treatment Group had sustained a temporary decline in its profitability following the Copa acquisition. This entity's results improved in the following months as its order backlog increased and its operations were gradually integrated into the Water Treatment Group's European organization.
For the first nine months of fiscal 2008, the Water Treatment Group recorded year-to-date revenues of $188.6 M, compared with $127.6 M the previous year. This increase is attributable to Enviroquip's and Copa's contribution for the entire nine-month period (versus six months and two and a half months respectively last year), coupled with an organic growth of 17.2% (at constant exchange rates). The group's normalized EBITDA grew by 79.3% to total $10.2 M, whereas its profit margin rose from 4.5% to 5.4%. Although better than the previous year, the Water Treatment Group's profit margin during the third quarter and first nine months was below management's expectations, due mainly to the fact that the performance of Eimco Water Technologies, LLC in Salt Lake City (Utah) is being disrupted by the asset and business carve-out operation currently taking place pursuant to the Arrangement. This transition period is causing a slowdown in the execution of certain contracts, leading to delayed delivery of orders and additional costs.
Pulp and Paper Group: Dynamic Development Worldwide and Enhanced Profitability
The Pulp and Paper Group continues to post solid revenue growth while its profitability is in line within expectations. Its third-quarter revenues rose 20.7% (32.4% excluding the impact of currency fluctuations) over the same period a year earlier. Revenues for the first nine months of the current fiscal year totalled $182.6 M, posting a 18.2% growth over last year (23.2% increase at constant exchange rates). Besides an organic growth (at constant exchange rates) of 7.5% in the third quarter and 2.3% in the first nine months, this group's revenue increase is mostly attributable to the execution in progress of large-scale contracts related to the fibre processing and chemical pulp preparation technologies acquired in December 2006, including one order worth more than $60 M. Although most of its revenue growth is currently derived from new equipment contracts, the Pulp and Paper Group is also posting a sound performance in the aftermarket, not only in North America, but also in Europe, South America and Asia.
Despite the unfavourable impact of currency fluctuations, this group's profitability improved significantly during the third quarter, as its quarterly normalized EBITDA increased by 55.3%, whereas its quarterly normalized EBITDA margin rose from 6.1% to 7.8%. For the first nine months of fiscal 2008, the Pulp and Paper Group's normalized EBITDA grew by 14.9%. However, its normalized EBITDA margin slightly declined, from 6.3% to 6.1%, due to the fact that profit margins achieved on large-scale contracts are lower than those historically recorded by the group, and to the additional costs associated with setting up the new technology centre in Karlstad (Sweden) following the December 2006 acquisition. This centre is now fully operational and increasingly contributing to the Pulp and Paper Group's profitability and international visibility in the pulp preparation equipment niche.
Outlook
"The outlook is bright for both of GLV's groups, which currently benefit from a growing demand in most of their segmented and geographic markets," indicated Richard Verreault, President and Chief Operating Officer of GLV. As at December 31, 2007, the order backlog of the Water Treatment Group and the Pulp and Paper Group stood at $164.6 M and $129.9 M respectively. GLV Inc.'s order backlog hence totalled $300.6 M (including the Manufacturing Unit's backlog), compared with $256.6 M at the same date in 2006, and $331.2 M as at September 30, 2007. The 8.4% decline (at constant exchange rates) in the value of the order backlog during the third quarter mostly results from the progressive recognition of the revenues associated with the Pulp and Paper Group's major $60 M contract in progress.
The Water Treatment Group continues to enjoy particularly strong demand within the municipal market in the United States and Canada, especially for submerged membrane bioreactors (MBR), but also for its more conventional technologies. In the United Kingdom, it benefits from solid activity in the municipal market, as well as in the industrial and energy segments. The group also continues to expand its international presence, including in Singapore, the Middle East and Australia.
The Water Treatment Group's major market objectives are to develop its share of the industrial segment, including the energy sector, and to increase its business base in the aftermarket, especially for its water intake screening solutions and submerged membrane bioreactors (MBR). In the third quarter, it undertook to set up an aftermarket sales force in the United States dedicated to the submerged membrane bioreactor technology (MBR). This new unit, which is currently in a start-up phase, is expected to soon contribute to the group's profitability. The Water Treatment Group also remains on the lookout for opportunities to integrate other advanced technologies into its product selection.
This group's operational objectives for the next quarters will be to rapidly restore the profitability of its Salt Lake City operations, while further strengthening the contribution of its European base. This group will also continue to develop its international outsourcing operations, notably to improve the profit margins achieved on conventional technology products. In regard to the carve-out transaction pursuant to the Arrangement, the relocation of the Salt Lake City and Oakville (Ontario) employees and the transfer of the replacement parts inventory to Austin (Texas) have been virtually completed. GLV is now focusing on separating the technical data of the Water Treatment Group and the former GL&V Process Group.
For its part, the Pulp and Paper Group is in a sound position to continue developing its business, given the growth in international demand and the significant progress it has made within the last two years to adapt its technological portfolio to the global pulp and paper industry's evolving needs and to establish its presence in the most dynamic geographic markets. In regard to operations, the Pulp and Paper Group continues to develop its international outsourcing infrastructure, including in China and India where it is also gradually increasing its market share in terms of contract bookings. Furthermore, the group is progressing as planned in the global standardization and reinforcement of its contract management practices as well as in the implementation of the total quality program, resulting in most of its business units being ISO compliant today.
"In the coming quarters, GLV will focus on the following issues: improve the Water Treatment Group's profitability, pursue our organic growth, seek further expansion projects, strengthen our global outsourcing and contract management operations, and complete the implementation of our total quality program. Through our various initiatives we remain firmly committed to our foremost objective of building GLV's long-term success so as to maximize future shareholder value," concluded management.
Note: All amounts are in Canadian dollars unless otherwise indicated.
Important 2008 Conference Date Changes!
PPI Market Pulp will now take place April 6-7, 2008. The RISI European Conference will be held April 7-9. Both events remain in Lisbon, Portugal.
