Lakeside Announces Fiscal 2012 Second Quarter Results and Proposed Financings
28 11월 2011 - 9:25PM
PR Newswire (Canada)
WELLAND, ON, Nov. 30, 2011 /CNW/ - Lakeside Steel Inc. ("Lakeside"
or the "Company") yesterday reported its financial results for its
fiscal 2012 second quarter ended September 30, 2011 ("Q2 2012").
For Q2 2012, the Company's revenue was $47,771,086, which
represents a decrease of $18,714,773 or 28.1% from revenue of
$66,485,859 for the fiscal 2011 second quarter ended September 30,
2010 ("Q2 2011"). For the six months ended September 30, 2012 ("YTD
2012"), the Company's revenue was $100,799,032, which represents a
decrease of $27,889,682 or 21.7% from revenue of $128,688,724 for
the six months ended September 30, 2010 ("YTD 2011"). The Company
recorded a net loss of $7,601,420 during Q2 2012, a decrease of
$8,801,171 from net income of $1,199,751 for Q2 2011. The Company
reported a loss of $0.04 per share for Q2 2012, compared to
earnings of $0.02 per share for Q2 2011. For YTD 2012, the Company
had a net loss of $8,694,479, a decrease of $9,085,568 from net
income of $391,089 for YTD 2011. The Company reported a loss of
$0.05 per share for YTD 2012, compared to earnings of $0.01 per
share for YTD 2011. The Company's adjusted EBITDA was ($6,274,060)
in Q2 2012, a decrease of $9,870,625 from adjusted EBITDA of
$3,596,565 for Q2 2011. For YTD 2012, the Company's adjusted EBITDA
was ($6,290,129), which represents a decrease of $10,455,453 from
adjusted EBITDA of $4,165,324 for YTD 2011. The Company noted
several factors that contributed to the $7.6 million loss in Q2
2012, including: (i) $3.0 million
margin erosion due to low priced imports and the sale of plain end
pipe at higher raw material costs;
(ii) $1.4 million start-up costs for
the U.S. sites in Alabama, Corpus Christi and Houston;
(iii) $1.3 million lost absorption of
fixed overhead due to the shutdown of the Welland plant for nine
days; (iv) $1.1 million foreign
exchange loss; and (v) $0.3 million
valuation allowance on taxes recoverable. During fiscal 2012,
customer demand for oil country tubular goods ("OCTG") shifted from
plain end pipe to thermally treated and end finished
products. This shift resulted in customer demand that
substantially exceeded available capacity among third party thermal
treatment and end-finishing processors, leading to extended wait
times. Ron Bedard, President and Chief Operating Officer,
commented: "The first half of this fiscal year has been a challenge
for the Company as the rapid and sustained shift in customer demand
towards fully finished OCTG products, the constraints in thermal
treatment and end finishing capacity in the market, higher cost of
goods sold and the presence of low cost overseas imports of plain
end products all contributed to an erosion of the Company's
margins. "The current lack of sufficient thermal treatment and end
finishing capacity in the market illustrates the importance of
Lakeside's vertical integration strategy. This strategy will
enable Lakeside to become a full-service provider of thermally
treated and end finished OCTG products." In Alabama, the
Company's new casing mill, with an estimated capacity of 192,000
annual tons, will begin production in December 2011. The thermal
treatment and end finishing facility for tubing products will be
completed in January 2012. This facility will add 67,000
annual tons of thermal treatment capacity and 55,000 annual tons of
end finishing capacity for tubing products. The thermal treatment
and end finishing facility for casing products will be completed in
June 2012. This facility will add 150,000 annual tons of thermal
treatment capacity and 110,000 annual tons of end finishing
capacity for casing products. The total remaining capital
expenditures for the Alabama facilities are $17.8 million. By
moving towards self-sufficiency in thermal treatment and end
finishing, Lakeside anticipates a return to profitability with
fully finished products to meet customer demand. As a result
of the Company's recent losses and increased wait times at third
party processors, which have resulted in higher working capital
requirements, the Company will require additional financing to
complete the Alabama and Corpus Christi thermal treatment and end
finishing facilities and to ramp up production. The Company
proposes to complete the following financing arrangements:
(i) The Company has agreed in
principle with Romspen Investment Corporation on the terms of a
$22.5 million term debt facility (the "Term Debt Facility") which
will provide the Company with net proceeds of $13.0 million after
repayment of a $7.5 million term loan with the Company's working
capital lender, repayment of $1.3 million owing to Bennett
Environmental Inc. and fees and expenses. The Term Debt Facility
will carry an interest rate of 15%, have a term of 12 months,
result in the issue of warrants equal to 10% of the outstanding
shares of the Company after completion of the $7.5 million equity
financing noted below at an exercise price equal to a 20% premium
above the issue price of the equity financing, have a term of three
years, and will be secured by a first charge on the fixed assets of
the Company. (ii) The Company also
entered into an agreement with Northern Securities Inc., on behalf
of a syndicate (the "Agents") and Northern Financial Corporation
("NFC") to raise $7.5 million, in a private placement of common
shares, to be priced in the context of the market, with a firm
commitment on the financing from NFC, subject to certain conditions
(the "Private Placement"). The Agents will be paid a
commission equal to 6% of the gross proceeds of the Private
Placement. The Term Debt Facility and Private Placement financing
are scheduled to close prior to December 23, 2011. The Private
Placement and Term Debt Facility are subject to receipt by the
Company of all required regulatory approvals. Mr. Bedard stated,
"The Term Debt Facility and Private Placement will provide the
Company with the remaining capital it requires to complete the
construction phase of its U.S. facilities. This additional capital
will allow the Company to complete its vertical integration
strategy and provide its customers with fully finished OCTG
products." Northern Securities Inc. ("NSI") is an agent of the
Company. The Company is a connected issuer of NSI under applicable
securities laws. Northern Financial Corporation ("NFC"), which
wholly owns NSI, owns approximately 13.0% of the common shares of
Jaguar Financial Corporation ("Jaguar"), which in turn owns
approximately 8.7% of the Company's common shares. Further, Vic
Alboini is the Chairman and Chief Executive Officer of each of the
Company and NFC. Mr. Alboini is also the Chairman and Chief
Executive Officer of Jaguar and owns approximately 3.4% of the
Company's common shares. In total, Mr. Alboini owns or has control
or direction over approximately 12.1% of the Company's common
shares and owns or has control or direction over approximately
20.0% of the common shares of NFC. Wes Roitman, a director of the
Company, is also a principal of Romspen Investment Corporation.
This news release does not constitute an offer of securities for
sale in the United States. The securities being issued under the
Private Placement have not been, nor will they be, registered under
the Unites States Securities Act of 1933, as amended, and such
securities may not be offered or sold within the United States
absent U.S. registration or an applicable exemption from U.S.
registration requirements. About Lakeside Steel Inc. Lakeside is a
2011 TSX Venture Exchange 50 company and the parent company of
Lakeside Steel Corporation, Lakeside Steel Alabama Inc. and
Lakeside Steel Texas Inc. Lakeside has operating facilities located
in Welland, Ontario, and Corpus Christi, Texas, and three
facilities currently being constructed in Thomasville, Alabama.
Lakeside is a diversified steel pipe and tubing manufacturer with a
focus on manufacturing and upgrading Oil Country Tubular Goods.
Lakeside's list of customers includes large oil and gas end users
as well as distributors across North America. Lakeside Steel
Alabama will be a diversified steel pipe manufacturer with thermal
treatment and end-finishing capabilities strategically situated in
the southern United States on successful completion of construction
of the new facilities in Thomasville, Alabama. Construction of the
Alabama facilities is currently underway. This press release may
contain forward-looking statements with respect to the Company, its
operations, strategy, financial performance and condition. These
statements generally can be identified by use of forward looking
words such as "may", "will", "expect", "estimate", "anticipate",
intends", "believe" or "continue" or the negative thereof or
similar variations. The actual results and performance of the
Company discussed herein could differ materially from those
expressed or implied by such statements. Such statements are
qualified in their entirety by the inherent risks and uncertainties
surrounding future expectations. Important factors that could cause
actual results to differ materially from expectations include,
among other things, general economic and market factors,
competition, changes in government regulations and the factors
described under "Risk Factors" in the Management's Discussion, and
Analysis, Annual Information Form and Filing Statement of the
Company which are available at www.sedar.com. The cautionary
statements qualify all forward-looking statements attributable to
the Company and persons acting on their behalf. Unless otherwise
stated, all forward-looking statements speak only as of the date of
this press release and the Company has no obligation to update such
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. Lakeside was recognized as a TSX Venture
50® company in 2010 and 2011. TSX Venture 50 is a trade-mark of TSX
Inc. and is used under license. Lakeside Steel Inc. CONTACT: Ron
Bedard Ken Hunter President and Chief Operating Officer Chief
FinancialOfficerLakeside Steel Inc. Lakeside Steel IncFAX:
(905)735-9069 FAX: (905)735-9069e-mail:
ron.bedard@lakesidesteelcorp.ca
e-mail:ken.hunter@lakesidesteelcorp.ca
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