NANAIMO, BC , Nov. 28,
2023 /CNW/ - Atlas Engineered Products ("AEP" or the
"Company") (TSXV: AEP) (OTC Markets: APEUF) is pleased to announce
its financial and operating results for the three and nine months
ended September 30, 2023. All amounts
are presented in Canadian dollars.
"The continued interest rate hikes and their effects on our
industry have resulted in a more competitive market for the
company's products where some contractors are putting their
building projects on pause until there is more certainty around the
direction of interest rates.," said Hadi Abassi, the Company's
CEO, President and Founder. "Despite the effect of higher interest
rates, there is an ongoing need for more housing in Canada and we strive to be the partner of
choice for contractors and homeowners during their construction
projects."
Financial Highlights for Q3 2023:
- During the third quarter of 2023, the Company acquired Léon
Chouinard et Fils Co. Ltd./Ltée. ("LCF") located in New Brunswick, Canada. The shares of LCF were
acquired for $26 million in cash plus
an initial working capital adjustment of $2,884,737. An additional working capital
adjustment will be finalized by the end of the fourth quarter. The
land and buildings of LCF were also acquired by the Company for
their appraised value of $2.792
million in cash. The Company financed the LCF acquisition
with a term loan and mortgage for $22.4
million, issuing 1,739,129 common shares at a value of
$2 million, and the rest with the
Company's existing cash generated from operations. During LCF's
last fiscal year ended December 31,
2022, they earned revenues of just over $25.7 million, net income of just over
$6.3 million, and a non-IFRS
normalized EBITDA of approximately $9.47
million, resulting in a normalized EBITDA margin of 37%.
- Revenue for the nine months ended September 30, 2023 was $35,216,250 compared to revenue of $46,909,032 for the nine months ended
September 30, 2022. Revenues
decreased due to some material prices (ie: lumber & I-Joist)
that are passed along to to customers stabilizing at significantly
lower prices than the prior two years. The market has also seen a
slowdown in some areas of Canada,
mainly Ontario and recently the
slowdown has been seen in British
Columbia as well. This has mainly been due to rising
interest rates resulting in the construction industry pausing to
assess affects on new housing demand, which has led to reduced
housing starts. The Company expects this slowdown to be short-term
in nature and that markets will strengthen as they adjust to
current market conditions and increased demand due to significant
population growth and the ongoing housing deficit.
- Gross margin for the nine months ended September 30, 2023 was 30%, which is lower than
gross margin of 32% for the nine months ended September 30, 2022. Gross margins decreased due
to the more competitive market for sales that is driven by the
significantly lower cost of lumber compared to the prior period.
Closer to the end of the nine months ended September 30, 2023, the Company had to find a
balance between generating sales and compromising slightly on the
gross margin available in a more competitive market. The Company
continues to focus on gross margins as well as revenue generation.
Typically, the Company has an increase in gross margins for the
third quarter, but due to the competitive market, lower lumber
prices and demand not increasing the Company had to lower gross
margins slightly in order to generate more revenues. The Company
was still able to maintain consistent gross margins for fiscal 2023
as seen in the table below.
SUMMARY OF
QUARTERLY
GROSS MARGIN
|
Three Months
Ended
|
Sept
2023
|
June
2023
|
Mar
2023
|
Gross Margin
%
|
30 %
|
30 %
|
30 %
|
% Increase over
previous quarter
|
0 %
|
0 %
|
|
- Operating expenses increased by $1,265,437 for the nine months ended September 30, 2023 compared to the nine months
ended September 30, 2022. 34% of this
increase is due to non-cash items of depreciation and amortization
and share based payments. 31% of this increase is related to one
time, non-recurring cash outlay expenses incurred in relation to
the acquisition of Léon Chouinard et Fils Co. Ltd./Ltée. ("LCF")
announced on August 23rd,
2023. The anticipated acquisition of LCF led the Company to bolster
human resources and systems to ensure the Company was ready and
able to handle the resulting growth and geographical expansion and
continue with future acquisitive growth which accounts for the
remaining increase in operating expenses.
- Net income after taxes was $2,630,287 for the nine months ended September 30, 2023 compared to a net income after
taxes of $6,739,031 for the nine
months ended September 30, 2022. The
Company recorded a lower net income after taxes in the current
period mainly due to decreased revenues, decreased gross margins,
and increased operating expenses.
- Non-IFRS measure normalized EBITDA margin decreased to 20% for
the nine months ended September 30,
2023 from 25% for the nine months ended September 30, 2022. These decreases were mainly
due to decreased gross margins and increased operating costs. Some
acquisition costs have been added back to normalized EBITDA, but
additional support costs for the Company's growth were not added
back as these will be ongoing costs moving forward. The table below
demonstrates how the additional support required impacted these
margins in the first and second quarter, but these EBITDA margins
have risen as results from LCF were included in the third quarter
from the acquisition date of August 23,
2023 that offset the additional costs required for
growth.
SUMMARY OF
QUARTERLY
EBITDA MARGINS
|
Three Months
Ended
|
Sept
2023
|
June
2023
|
Mar
2023
|
EBITDA
Margin
|
20 %
|
17 %
|
16 %
|
Adjusted EBITDA
Margin
|
21 %
|
18 %
|
18 %
|
Normalized EBITDA
Margin
|
22 %
|
20 %
|
18 %
|
SELECTED FINANCIAL
RESULTS
|
Three Months
Ended
|
Nine Months
Ended
|
Sept
2023
|
Sept
2022
|
Sept
2023
|
Sept
2022
|
Revenue from the
Business
|
$14,369,546
|
$17,638,289
|
$35,216,250
|
$46,909,032
|
Cost of
Sales
|
10,111,245
|
11,473,688
|
24,703,881
|
32,114,233
|
Gross
Profit
|
4,258,301
|
6,164,601
|
10,512,369
|
14,794,799
|
Gross Margin
%
|
30 %
|
35 %
|
30 %
|
32 %
|
Operating
Expenses
|
2,208,058
|
1,773,293
|
6,514,786
|
5,249,349
|
Operating
Profit
|
2,050,243
|
4,391,308
|
3,997,583
|
9,545,450
|
Net Income After
Adjustments and Taxes
|
1,300,751
|
3,131,612
|
2,630,287
|
6,739,031
|
Adjusted
EBITDA
|
2,950,340
|
5,155,651
|
6,741,483
|
11,778,911
|
Adjusted EBITDA Margin
%
|
21 %
|
29 %
|
19 %
|
25 %
|
Normalized
EBITDA
|
3,164,306
|
5,155,651
|
7,136,847
|
11,778,911
|
Normalized EBITDA
Margin %
|
22 %
|
29 %
|
20 %
|
25 %
|
Weighted Average Number
of Shares, Basic
|
58,087,214
|
59,215,310
|
57,757,016
|
59,016,124
|
Adjusted EBITDA per
Share ($ per share)
|
0.05
|
0.09
|
0.12
|
0.20
|
Income per Share, Basic
($ per share)
|
0.02
|
0.05
|
0.05
|
0.11
|
Income per Share, Fully
Diluted ($ per share)
|
0.02
|
0.05
|
0.04
|
0.11
|
|
|
|
|
|
Selected Financial
Information as at:
|
|
|
|
Sept
2023
|
Dec
2022
|
Total Assets
|
|
|
$81,299,972
|
$50,491,344
|
Total Non-Current
Liabilities
|
|
|
37,733,299
|
14,757,079
|
Outlook for 2023:
The Company is continuing to operate in a more competitive
market during 2023 as interest rates have risen in an effort to
slow inflation. The Company currently anticipates that increased
interest rates will have a minimal overall affect on the long-term
housing market after the initial impact of the increase is absorbed
by the market. The number of homes that are needed to support
Canada's continued population
growth and immigration continues to be significant. The Company
will continue to monitor the effects of interest rates on the
housing market, and is prepared to manage pricing and explore new
markets in order to continue to drive organic growth as much as
possible during fiscal 2023.
Reduced raw material costs, such as lumber and I-Joists,
continue to impact the Company's revenues. These costs are passed
along directly to the customer and will result in decreased sales
prices to the customer as input costs decrease. Average lumber and
I-Joist prices have decreased by roughly 50% for the nine months
ended September 30, 2023 compared to
the nine months ended September 30,
2022.
The Company's large order announced on March 9, 2023 was delayed in Quarter 1. Part of
this order was delivered in Quarter 2 and 3 of 2023, with the rest
to be delivered in Quarter 4 of 2023 and Quarter 1 of 2024. Permit
and construction delays have caused postponements in these
deliveries that were outside the Company's control.
The recent acquisition of LCF is a great addition to the AEP
group and acquisitions remains a key part of AEP's long term
strategic goals. The Company has built a strong pipeline of M&A
opportunities and will continue to assess more M&A
opportunities that fit within the Company's goals and strategies,
while also working to bring in the latest automation to improve
operational efficiencies, and adding new products and services to
better serve our customers.
Non-GAAP / Non-IFRS Financial Measures
Certain financial measures in this news release do not have any
standardized meaning under IFRS and, therefore are considered
non-IFRS or non-GAAP measures. These non-IFRS measures are used by
management to facilitate the analysis and comparison of
period-to-period operating results for AEP and to assess whether
AEP's operations are generating sufficient operating cash flow to
fund working capital needs and to fund capital expenditures. As
these non-IFRS measures do not have any standardized meaning under
IFRS, these measures may not be comparable to similar measures
presented by other issuers. The non-IFRS measures used in this news
release may include "EBITDA", "EBITDA margin", "adjusted EBITDA",
"adjusted EBITDA margin", "normalized EBITDA" and "normalized
EBITDA margin". For a description of the composition of these
measures, please refer to AEP's Management's Discussion and
Analysis for the period ended June 30,
2023 under "Non-IFRS / Non-GAAP Financial Measures",
available on AEP's website at www.atlasengineeredproducts.com
or on SEDAR at www.sedar.com.
About Atlas Engineered Products Ltd.
AEP is a growth company that is acquiring and operating
profitable, well-established operations in Canada's truss and engineered products
industry. We have a well-defined and disciplined acquisition and
operating growth strategy enabling us to scale aggressively and
apply new technologies, giving us a unique opportunity to
consolidate a fragmented industry of independent operators.
FORWARD LOOKING INFORMATION
Information set forth in this news release contains
forward-looking statements. These statements reflect management's
current estimates, beliefs, intentions and expectations; they are
not guarantees of future performance. Although AEP believes that
the expectations reflected in the forward looking statements are
reasonable, there is no assurance that such expectations will prove
to be correct, or that such future events will occur in the
disclosed time frames or at all. AEP cautions that all forward
looking statements are inherently uncertain and that actual
performance may be affected by a number of material factors, many
of which are beyond AEP's control. Such factors include, among
other things: Risks and uncertainties relating to AEP,
including those to be described in the Management's Discussion and
Analysis ("MD&A") for AEP's three and nine months ended
September 30, 2023. Accordingly,
actual and future events, conditions and results may differ
materially from the estimates, beliefs, intentions and expectations
expressed or implied in the forward-looking information. Except as
required under applicable securities legislation, AEP
undertakes no obligation to publicly update or revise
forward-looking information.
SELECTED FINANCIAL INFORMATION
Except as noted below, the financial information provided in
this news release is derived from the AEP's audited financial
statements for the three and nine months ended September 30, 2023 and the related notes thereto
as prepared in accordance with International Financial Reporting
Standards ("IFRS") and related IFRS Interpretations Committee
("IFRICs") as issued by the International Accounting Standards
Board ("IASB"). A copy of AEP's financial statements for the
three and nine months ended September 30,
2023 and the related Management's Discussion and Analysis is
available on AEP's website at www.atlasengineeredproducts.com
or on SEDAR at www.sedar.com.
Financial information for AEP's acquisitions are included in
AEP's unaudited financial statements from the date of acquisition.
Financial information for acquired businesses for periods prior to
the date of acquisition were prepared by management and have not
been reviewed or audited by independent auditors.
NEITHER THE 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.
SOURCE Atlas Engineered Products Ltd.