OTTAWA, ONTARIO - September 17, 2013
- Thermal Energy International Inc. (TSXV: TMG), a
leading provider of custom energy and emission reduction
technologies for energy intensive industries and institutions
worldwide, today announced its financial results for the
three-month and twelve-month periods ended May 31, 2013.
Q4 2013 Highlights
(compared to Q4 FY 2012)
-Sales of $1.9
million compared to $3.5 million last year
-Gross profit of $0.7
million (39% of sales) compared to $1.3 million (38%) last
year
-Administration and
Selling, Marketing and Business Development expenses of $1.3
million compared to $1.5 million last year.
-Impairment of
goodwill and intangible assets of $2.3 million compared to $nil
last year
-Net loss of $2.7
million compared to $26,341 last year
FY 2013 Highlights (compared to FY 2012)
-Sales of $8.2
million compared to $13.1 million last year
-Gross profit of $5.0
million (61% of sales) compared to $5.6 million (43%) last
year
-Administration and
Selling, Marketing and Business Development expenses of $5.6
million were unchanged compared to last year
-Impairment of
goodwill and intangible assets of $2.3 million compared to $nil
last year
-Net loss of $2.8
million compared to net income of $84,731 last year.
Subsequent Events
and Business Outlook
-15 heat
recovery or GEM(R)
projects currently being
developed for 10 different customers on a
paid or exclusive basis compared to 7 sites for 3 customers at the
end of FY 2012 and only 1 site and 1 customer in each of FY 2011
and FY2010.
-Total
order backlog of $8.6 million as at September 16, 2013 is the
highest level of order backlog in the Company's history and exceeds
total sales for all of fiscal year 2013. $0.5
million of the order backlog is related to long term contracts that
are not expected to be reflected in revenue within the next 12
months. The Company includes in "order backlog" any purchase orders
that have been received by the Company but have not yet been
reflected as revenue in the Company's published quarterly financial
statements. Current order backlog includes:
-$3.6 million heat recovery order
from a major North American pulp and paper company
announced June 3, 2013;
-$800,000 heat recovery and GEM(R) steam trap orders from a
major publicly owned hospital announced June
13, 2013;
-$480,000
GEM(R) steam trap order from a
major multinational food and beverage company announced July 3,
2013;
-$780,000 heat recovery and GEM(R) steam trap orders from a
major publicly owned hospital announced
September 10, 2013; and,
-$1.7
million heat recovery and GEM(R) steam trap orders from a
Fortune 500 food and beverage company announced September 16,
2013.
-On October 16, 2012 we announced that Tim Gardner, the inventor
of the GEM(R) steam
trap and founder of the GEM(R)
business, had rejoined Thermal Energy after a 3 year
absence. Mr. Gardner has now resigned from Thermal Energy to pursue
other interests. We were glad to have had Mr. Gardner with us for
the last year and we wish him all the best for the future. With Mr.
Gardner's departure, and on the strength of a growing pipeline and
record order backlog, Thermal Energy is currently actively looking to
hire four new sales people plus a global marketing
manager.
"After three straight
years with strong sales growth and profitability improvements,
Fiscal 2013 was a difficult year plagued by a number of temporary
unfortunate issues" commented Thermal Energy CEO William Crossland.
"The economic events of the last five years, and in particular low
energy prices and the ongoing recession in Europe, finally caught
up with us and a non-cash write down of the GEM(R) goodwill and
intangible assets was necessary, unlike the previous two years we
did not benefit from a large multi-million dollar heat recovery
project, a number of other heat recovery project orders were held
up due to temporary technical issues (since resolved), and
GEM(R) sales were
impacted by the wind down of two corporate relationships. Despite
these issues however, our cash position has remained virtually
unchanged from the previous year which is a testament to the
current resilience of the Company, which would not have been the
case three years ago. I am pleased to see all of the difficult
issues of Fiscal 2013 now behind us. The investments we made in our
sales and distribution strategies and capabilities 12 to 18 months
ago are now starting to bear fruit as evidenced by a growing
pipeline and the largest order backlog in the Company's history. We
are in a strong position to continue growing the company and, as
noted above, in order to take the company to the next level we are
looking to immediately hire five new sales and marketing
personnel."
Q4 2013 Financial
Review
Revenues in the
fourth quarter 2013 were $1.9 million,
compared with $3.5 million for the same period in 2012, a decrease
of $1.6 million. Revenue from heat recovery projects fell by $1.3
million primarily due to completion of the $5.8 million contract
with Fibrek in the fourth quarter of last year accounting for $1.6
million revenue in that period. Other heat recovery revenue in the
fourth quarter 2013 was $298,811 higher than last year, partially
offsetting the loss of the Fibrek revenue. Sales of
GEM(R) product meanwhile fell by $317,199 as a result of decreased
sales to a major pharmaceutical company and lower sales across
Europe due to the economy, but partially offset by increased sales
in the rest of the world.
The gross profit in the fourth quarter
of FY 2013 was $746,358 (39%) compared with $1.3 million (38%) for
the same period in 2012.
Administration and
Selling, Marketing and Business Development expenses incurred in
the fourth quarter 2013 were $1.3 million, compared to $1.5 million
incurred during the same period in 2012 primarily due to lower
commissions, legal fees, bad debts and foreign exchange
losses.
Research and development expenses in
the quarter ended May 31, 2013 were $19,865 compared to $nil in the
quarter ended May 31, 2012. FY2013 saw an increase in R&D
activity across a number of projects including the ISTP project in
China, as announced February 7, 2013.
A $2.3 million
non-cash charge for impairment of goodwill and other intangible
assets was taken in the quarter ended May 31, 2013
compared to $nil last year. In the spring of 2008,
just prior to the acquisition of the GEM(R)
business by Thermal Energy on July 4, 2008, energy
prices and cleantech company valuations were at record levels. Six
months later energy prices had fallen more than 50%. While oil
prices have gradually recovered some of the loss, natural gas
prices in North America are still less than 50% of the early 2008
levels and natural gas is the primary fuel source used by the
majority of our customers. In addition, the second half of 2008 saw
the beginning of a serious global economic recession. While the US
economy has recovered the EU economy has still not climbed back to
pre-2008 levels. These factors, plus a re-organization of the UK
based sales group during the last two years, including two key UK
sales people relocating to North America, has made it very
difficult to achieve the results expected from the
GEM(R) business when it was acquired 5 years ago. As a result,
during impairment testing conducted in
connection with the fiscal year end of May 31, 2013 it was
determined that a non-cash write down of the goodwill and other
intangible assets related to the GEM(R) business was
appropriate at this time.
Net loss for the
fourth quarter 2013 was $2.7 million compared
with $26,341 for the same period in FY 2012, mainly as a result of
the non-cash impairment of goodwill and intangible assets and the
lower level of sales and related gross profit.
Fiscal Year 2013
Financial Review
Sales
were $8.2 million in FY 2013 compared to $13.1
million in FY 2012. Sales of heat recovery systems decreased in the
year by $5.0 million while sales of GEM(R) steam traps increased
by $52,895. Last year's heat recovery revenue of $9.7 million
included the $5.8 million Fibrek contract, the $2.1 million St.
George's contract and a number of other smaller contracts totaling
$1.8 million. This year's heat recovery revenue did not include any
contracts similar in size to Fibrek or St. George's but the Company
was still able to generate $4.7 million in heat recovery revenue
from a number of smaller contracts with the largest being the $1.6
million Fortress lease extension. GEM(R) sales in FY 2013 were
$3.5 million compared to $3.4 million in FY 2012. Reduced sales to
a major pharmaceutical company and a major food manufacturer and
general decreases in UK and the rest of the world due to the
depressed economy were offset by an increase in sales to major
hospitals and the continuing growth of GEM(R) sales in North
America.
Gross profit of $5.0 million (60.6% of sales) in FY 2013 compared
to $5.6 million (42.9%) last year. The improvement in gross profit
as a percentage of sales is partly a result of a higher proportion
of revenues coming from sales of GEM(R) and partly due to the
extension of the Greenpower Purchase Agreement extension with
Fortress Specialty Cellulose.
Administration and
Selling, Marketing and Business Development expenses in FY 2013
totaled $5.6 million compared to $5.6 million
in FY 2012. Increases resulting from the additional staff and
investor relations activities were offset by decreases in legal
fees and audit fees, foreign exchange losses and the write down of
the net investment in lease following a permitted plant shutdown at
the site.
Research and
development costs increased in FY 2013 to $184,388 compared to
$8,455 in FY 2012. The increase is related to
an increased focus on R&D activity in the current year,
particularly with regard to the product development project
targeting the Chinese petrochemical market as well as development
of sundry ancillary products relating to the GEM(R) product
range.
A $2.3 million charge
for impairment of goodwill and other intangible assets was taken
during FY 2013 compared to $nil last year.
The impairment is discussed above under "Q4 2013 Financial
Review".
Net loss for the year
was $2.8 million compared to net income of $84,731 last year. The
difference is primarily due to the non-cash
impairment in goodwill and other intangible assets and the lower
level of sales and related gross profit.
Liquidity & Capital Resources
The working capital
was $1.6 million as at May 31, 2013 compared
to $2.6 million at the end of FY 2012. The decrease in working
capital was primarily driven by the Company's negative cash flow
from operations (defined as net income, plus
items not involving cash, plus lease payments received, adjusted
for the capitalization of the Greenpower Purchase Agreement
extension).
Cash and cash
equivalents as at May 31, 2013 of $1.3
million was largely unchanged from $1.4 million last year because
"Net cash provided (used) in operations" for the year of ($759,000)
was offset by the "Finance lease payments received" of
$712,213.
All figures are in
Canadian dollars. Full financial results including Management's
Discussion and Analysis and accompanying notes to the financial
results, are available on www.SEDAR.com and
www.thermalenergy.com.
About
Thermal Energy International Inc.
Thermal Energy
International Inc. is an innovative cleantech company providing a
variety of proprietary and proven energy efficiency, emission
reduction, water efficiency, and bioenergy products and solutions
to the industrial, commercial and institutional markets worldwide.
Thermal Energy is also a fully accredited professional engineering
firm, and can offer advanced process and applications engineering
services. By providing a unique mix of proprietary products
together with process, energy, environmental, and financial
expertise Thermal Energy is able to deliver significant financial
and environmental benefits to its customers.
Thermal
Energy's products include; GEM(R) - Steam traps and condensate return systems,
FLU-ACE(R) - Direct contact condensing heat recovery, and
Dry
RexTM
- Low temperature biomass drying systems.
These award winning products are effective in a wide variety of
industries and application and have an excellent track record of
longevity, proven reliability and performance providing significant
energy savings, reduced GHG emissions, improved water efficiency,
lower maintenance costs, improved product quality and increased
production efficiency.
Thermal Energy
International Inc. has offices in Ottawa, Canada as well as
Bristol, UK, United States, Italy and China. To find out more about
Thermal Energy International Inc. (TSX-V: TMG), visit our website
at http://www.thermalenergy.com.
William Crossland
President and CEO
Thermal Energy International Inc.
613-723-6776
bill.crossland@thermalenergy.com
# # #
This press
release contains forward-looking statements relating to, and
amongst other things, based on management's expectations, estimates
and projections, the anticipated effectiveness of the Company's
products and services and the timing of revenues to be received by
the Company. Statements relating to the Company's backlog, projects
in development and the Company's expectations as to continued
growth are all forward looking statements. These statements are not
guarantees of future performance and involve a number of risks,
uncertainties and assumptions. Many factors, some of which are
outside of the Company's control, could cause events and results to
differ materially from those stated. Fulfilment of
orders, installation of product and
activation of product could all be delayed for a number of reasons,
some of which are outside of the Company's control, which would
result in anticipated revenues from such projects being delayed or
in the most serious cases eliminated. Orders in the Company's
backlog as described above may not turn into revenue due to many
factors, some of which are outside of the Company's control,
including but not limited to the Company's ability to deliver
products on time and in accordance with specifications and the
continuing financial viability of the customer. Heat recovery and
GEM(R) steam trap projects being developed by the Company at this
time may not result in orders for the Company's products. The
Company disclaims any obligation to publicly update or revise any
such statements except as required by law.
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.
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