TIDMMTT
RNS Number : 1794D
Metal-Tech Ltd
11 May 2012
11 May 2012
Metal-Tech Ltd.
("Metal-Tech" or "the Company")
Results for the year ended 31 December 2011
Metal-Tech, the producer and recycler of speciality metals such
as Tungsten and Molybdenum, announces results for the year ended 31
December 2011.
Financial Summary:
-- Revenue increased by 14% to US$52.1m (2010: US$45.9m)
-- Net profit of US$4.5m, including US$3.6m income from
discontinued operations (2010: US$26.8m loss)
-- Gross margin was 13% (2010: 0.9%)
-- Positive cash flow from operating activities of US$3.4m (31 December 2010: negative US$1.0m)
-- Operating expenses reduced to US$7.3m (2010: US$7.9m)
-- Earnings per share of US$0.12 (2010: $0.54 loss)
-- Cash, cash deposits and restricted cash balance at 31
December 2011 were US$2.9m (30 June 2011: US$ US$6.4m) (31 December
2010: US$7.3m)
-- Bank debt reduced to US$15.7m at 31 December 2011 (31
December 2010: US$21.9m after neutralisation of US$6.8m loan of non
consolidated subsidiary)
Operational Summary:
-- Sales volumes decreased by approximately 30%, mainly due to
working capital restraints resulting from higher cost of raw
material (about a 50% increase in Tungsten prices over the
year)
-- Improved profitability was driven by:
o Improved commercial conduct which enabled the Company to be in
line with the market and become less affected from price
fluctuations
o Increased recycling production
o Historical inventory that was utilised
-- Cash flow management improved resulting in positive cash flow
of US$3.4m of the operating activities due to:
o Improvement of the DSO (Days Sales Outstanding)
o Significant decrease in inventory to a minimum desired
level
-- Production:
o Increase of recycling capacity by approximately 25%. Capital
investment will be needed in order to maintain progress
o Enhancement of production utilities and improved production
management resulted in a capacity increase in a couple of
production lines
-- In March 2011, a four-month industrial pilot phase for the
validation of the Company's novel molybdenum extraction technology
was completed satisfactorily under the supervision of a major
publicly-traded international Chilean copper/molybdenum company,
however, commercial negotiations are stalled
-- Tightly managed costs and cash flow to improve efficiency
while maintaining strong focus on R&D in strategic areas
-- The Company's arbitration case against the Republic of Uzbekistan is ongoing
-- The bankruptcy issue with the Company's Mongolian joint
venture, Shim-Technology Co. Ltd. (Shim-Tech), is still under court
process
-- Currently the Company is seeking to raise external capital
which is essential for the continuance of the success of the
Company. The capital is needed especially for:
o Working capital
o Further expansion of the production lines including the
recycling plant
Commenting on the results, Aik Rosenberg, Executive Chairman and
CEO of the Company, said: "Despite the dual challenges of world
financial crisis and high working capital needs, I am pleased that
we were able to achieve good financial results. This was achieved
through better commercial conduct, focus on production efficiency
and strategic planning.
"Looking ahead, with the high price of raw material, the Company
remains under great pressure financially and continues to manage
its cash position. In order to maintain growth of the Company,
additional capital is required to achieve our goals that will
return us to sustained growth and profitability."
Enquiries:
Metal-Tech Ltd. +972 544 215454
Ariel (Aik) Rosenberg
Panmure Gordon +44 20 7459 3600
Fred Walsh
Hannah Woodley, Charles Leigh-Pemberton
Luther Pendragon +44 20 7618 9100
Harry Chathli, Alexis Gore
Operating Review
Metal-Tech is pleased to report strong revenue growth, an
improved operational performance and a return to profit in 2011.
Revenue increased by 14% to US$52.1m (2010: US$45.9m), and the
Company returned to net profit of US$4.5m (2010: US$26.8m loss).
The improved results are the result of increased sales prices, with
increasing Tungsten prices compared with the same period last year,
and tight cost control. Tungsten prices did decline from September
2011 but stablised towards the end of the year.
Throughout 2011, the Company continued to reduce operating
expenses across all business functions. Metal-Tech achieved a gross
profit of US$6.9m in 2011 compared with US$0.4m in 2010.
In 2011, Metal-Tech was able to expand and diversify its
customer base as the Company successfully entered new markets
including the Asian market.
As previously stated, Metal-Tech took steps to increase its
recycling and production capacity in Israel by preparing and
submitting an investment program to the Israel Ministry of Trade
and Industry as well as seeking other international opportunities
for co-production. The Israeli Investment Center has now approved
the Company's investment program of US$7.6m, and will provide a
grant of 20%, with the option of an additional 12%, of the
investment costs. While a proportion of the investment has been
made from Metal-Tech's available cash resources including operating
cash flow, further finance will be required to complete the
program. Such funding would assist Metal-Tech's plans to increase
its production capacity.
Focus on R&D
Metal-Tech continued to its investment in R&D in 2011. As
stated previously, the Company made a breakthrough on 31 March 2011
when the four-month industrial pilot phase for the validation of
the novel molybdenum extraction technology was completed under the
supervision of a major publicly-traded international Chilean
coppermolybdenum company. The process and equipment were proven to
operate continuously at high efficiency and with low operating
expense, and produced high quality molybdenum and rhenium from low
grade molybdenum concentrate.
This success may lead to the implementation of this technology
by the Chilean company as well as others. However, although the
parties are currently in negotiations regarding the implementation
of the project, the Company does not have any information on when
and what type of project will be implemented, and the financial
impact of this development which may include an element of required
funding by the Company.
Update on Uzbekistan Action
As announced in January 2010, Metal-Tech filed a Request for
Arbitration against the Republic of Uzbekistan, alleging that the
country's treatment of Metal-Tech's 50% investment in
UzMetal-Technology, a joint venture to produce high-quality
molybdenum products, is unlawful.
Metal-Tech is seeking damages because it claims that Uzbekistan
breached its obligations by denying Uzmetal Technology necessary
inputs of molybdenum concentrate in mid-2006, thereby forcing the
joint venture to become idle for lack of raw materials to process.
The damage to Metal-Tech was exacerbated when Uzbekistan and its
state-owned companies (which owned the other 50 percent of Uzmetal
Technology) later forced the joint venture into bankruptcy and
eventual liquidation.
The current position is that an Arbitral Tribunal, comprising a
nominee of the Republic of Uzbekistan, a nominee of the Company and
an independent but mutually agreed nominee as the Chair, has been
appointed. To date, both parties have filed all their respective
submissions before the Tribunal, all in accordance with the
procedural calendar. The hearing of the case took place in January
2012. The parties are due to present their respective briefs in
June 2012, and supplementary briefs in July 2012.
Update on Mongolian Operations
As stated on 28 June 2011, the Company was informed that the
court in Erdenet has in May 2011 declared Shim-Tech, the Company's
Mongolian subsidiary, bankrupt and ordered relevant authorities to
freeze its accounts and seize its assets. As a result, the Company
is no longer in control of Shim-Tech and therefore ceased to
consolidate the financial statements of Shim-Tech. As previously
stated, Metal-Tech is taking all necessary actions in Mongolia to
attain a fair and just result for the Company, including the
submission of its claims as creditor of Shim-Tech.
Update on prospective investment
As stated in March 2012, following the signing of a memorandum
of understanding (MOU) for the potential investment from Technoplus
to Metal-Tech in October 2011, the MOU with Technoplus and the
"no-shop" period pursuant thereto, during which the Company and
anyone acting on its behalf refrained from negotiating with third
parties any transaction, which involves issuance of shares and/or
options in the Company's equity, have expired.
Metal-Tech received a letter from Technoplus in March 2012,
which included an allegation with respect to the Company's and
other third parties liability for breach of the MOU. The Company
strongly rejects any allegation that it has breached any of the
conditions of the MOU and will rigorously defend itself against any
such claims.
Metal-Tech continues to hold discussions with other potential
investors and will inform the market of any further developments as
required. The Board maintains that any future fundraising will be
utilised to support the growth of the Company, both through
investments in the Company's production facilities, and
facilitating working capital as required.
Financial Review
Income statement
Revenues for the year ending 31 December 2011 were US$52.1m,
compared with US$45.9m for the prior year. Profit attributable to
equity holders was US$4.6m (2010: US$20.8m loss). This increase is
primarily due to recording of income from discontinued operation
US$3.7m for the year ending 31 December 2011, compared with loss of
US$19.7m for the prior year. Metal-Tech achieved a gross profit of
US$6.9m, compared with a gross loss of US$0.4m for 2010, due to
tight cost control measures and an increase in Tungsten prices.
Throughout 2011 the Company continued to reduce operating
expenses across all business functions. The Company reduced its
selling and marketing expenses by US$0.7m.
General and Administrative expenses increased to US$4.7m in 2011
compared with US$3.8m in 2010. This increase was the result of
several factors, including increase of US$0.4m in Legal expenses
related to Uzbekistan arbitration and bonus in the amount of
US$0.7m to CEO and Chairman of the Board of Directors according to
his employment agreement.
Balance sheet statement
The Company reduced its debt levels with a reduction of bank
debt from US$21.9m at 31 December 2010 to US$15.7m at 31 December
2011. Inventory increased by US$2.3m from US$21.1m at 31 December
2010, this increase is primarily due to increase in average
Tungsten price.
At 31 December 2011, the cash, cash equivalents and restricted
cash balance of the Company was US$2.9m compared to US$6.4m at 30
June 2011, and US$7.3m at 31 December 2010. The Company believes
this is sufficient to meet Metal-Tech's current financing costs and
expected operating expenses. The Company will continue to prudently
manage its affairs in order to maintain sufficient operating cash
flow.
The Group has a positive working capital position at 31 December
2011 compared to working capital deficiency at 31 December
2010.
Metal-Tech continues to invest in expansion of the recycling
plant. The Company's investments in 2011 amounted to US$1.6m.
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
December 31,
--------------
2011 2010
------ ------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 354 2,243
Restricted cash 2,564 5,104
Trade receivables 5,604 11,076
Other accounts receivable 1,297 1,201
Inventories 23,401 21,131
------ ------
33,220 40,755
------ ------
NON-CURRENT ASSETS:
Trade receivables 620 -
Property, plant and equipment 10,173 9,739
------ ------
10,793 9,739
Total assets 44,013 50,494
====== ======
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share data)
December 31,
------------------
2011 2010
-------- --------
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term bank credit 2,702 3,762
Short-term loans and current maturities 12,616 17,636
Loan related to suspended plant - 6,787
Trade payables 10,015 8,620
Other trade payables related to suspended
plant - 3,334
Income taxes payable 3,000 5,319
Other accounts payable 4,773 4,507
33,106 49,965
-------- --------
NON-CURRENT LIABILITIES:
Long-term loans 414 487
Employee benefit obligations 214 506
Other liabilities 404 468
Provision for losses in excess of investment
in investee - 69
1,032 1,530
-------- --------
Total liabilities 34,138 51,495
-------- --------
EQUITY (DEFICIT):
Equity attributable to the equity holders
of the Company:
Issued capital 2,399 2,399
Share premium 23,892 23,892
Other capital reserves 1,131 878
Capital reserve from transaction with
controlling shareholders 96 -
Accumulated deficit (17,643) (22,249)
-------- --------
9,875 4,920
Non- controlling interests - (5,921)
-------- --------
Total equity (deficit) 9,875 (1,001)
-------- --------
Total liabilities and equity 44,013 50,494
======== ========
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
U.S. dollars in thousands (except share and per share data)
Year ended December
31,
----------------------
2011 2010
---------- ----------
Revenues 52,149 45,878
Cost of sales 45,256 45,471
---------- ----------
Gross profit 6,893 407
---------- ----------
Operating expenses:
Research and development expenses ,net 573 778
Selling and marketing expenses 2,101 3,119
General and administrative expenses 4,722 3,798
---------- ----------
7,396 7,695
---------- ----------
Operating loss (503) (7,288)
Finance costs (1,309) (1,962)
Finance income 783 157
Other income, net - 3
Company's share of income (loss) of company
accounted for at equity 69 (202)
Loss before taxes on income (960) (9,292)
Tax benefit 1,769 2,201
---------- ----------
Income (loss) from continuing operations 809 (7,091)
Income (loss) from discontinued operations,
net 3,663 (19,661)
---------- ----------
Net income (loss) 4,472 (26,752)
Other comprehensive income - -
---------- ----------
Total comprehensive income (loss) 4,472 (26,752)
========== ==========
Total comprehensive income (loss) attributable
to:
Equity holders of the Company 4,606 (20,831)
Non- controlling interests (134) (5,921)
---------- ----------
4,472 (26,752)
========== ==========
Net earnings (loss) per share attributable
to equity holders of the Company (in USD):
Basic and diluted earnings (loss):
Earnings (loss) from continuing operations 0.02 (0.18)
Earnings (loss) from discontinued operations 0.10 (0.36)
---------- ----------
Net earnings (loss) 0.12 (0.54)
========== ==========
Weighted average number of shares used in
computing basic and diluted net (income)
loss per share attributable to Ordinary equity
holders of the Company 38,376,923 38,376,923
========== ==========
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
U.S. dollars in thousands
Attributable to equity holders of the Company
----------------------------------------------------
Capital
reserve
from
transaction
Other with Non- Total
Share Share capital controlling Accumulated controlling equity
capital premium reserves shareholder deficit Total interests (deficit)
------- ------- -------- ----------- ------------ ------ ----------- ---------
Balance as of January 1, 2011 2,399 23,892 878 - (22,249) 4,920 (5,921) (1,001)
Total comprehensive (income)
loss - - - - 4,606 4,606 (134) 4,472
Share based payment - - 253 - - 253 - 253
Deconsolidation of subsidiary
(Note
2a) - - - - - - 6,055 6,055
Fair value of bankguarantees
provided
by controlling shareholder - - - 96 - 96 - 96
--------
Balance as of December 31, 2011 2,399 23,892 1,131 96 (17,643) 9,875 - 9,875
======= ======= ======== =========== ============ ====== =========== =========
Attributable to equity holders of the Company
---------------------------------------------------------
Total
Share Share Other capital Accumulated Non- controlling equity
capital premium reserves deficit Total interests (deficit)
-------- -------- ------------- ------------ -------- ---------------- ----------
Balance as of January 1, 2010 2,399 23,892 714 (1,418) 25,587 - 25,587
Total comprehensive loss - - - (20,831) (20,831) (5,921) (26,752)
Share based payment - - 164 - 164 - 164
Balance as of December 31,
2010 2,399 23,892 878 (22,249) 4,920 (5,921) (1,001)
======== ======== ============= ============ ======== ================ ==========
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Year ended December 31
------------------------
2011 2010
----------- -----------
Cash flows from operating activities:
Net income (loss) 4,472 (26,752)
----------- -----------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Adjustments to the profit or loss items:
Depreciation 1,188 1,099
Loss (income) from discontinued operations, net (3,663) 19,661
Gain on marketable securities - (13)
Capital gain from sale of property, plant and equipment - (4)
Employee benefit obligations (292) 201
Accrued interest and foreign exchange differences on short
and long-term liabilities, net 384 1,078
Share based payments 253 164
Company's share of loss (income) of company accounted
for at equity (69) 202
Income tax benefit (1,769) (2,201)
(3,968) 20,187
----------- -----------
Changes in operating asset and liability items:
Decrease (increase) in trade receivables, net 4,852 (1,324)
Increase in other accounts receivable (52) (475)
Decrease (increase) in inventory (2,270) 4,696
Increase in trade payables 1,505 3,132
Increase (decrease) in related parties, net 689 (68)
Increase (decrease) in other accounts payable (664) 1,022
----------- -----------
4,060 6,983
----------- -----------
Cash paid and received during the year for:
Interest received 26 23
Interest paid (730) (1,101)
Income tax received - 232
Income tax paid (163) (97)
----------- -----------
(867) (943)
----------- -----------
Net cash provided by (used in) continuing operating activities 3,697 (525)
----------- -----------
Net cash used in discontinued operating activities (268) (480)
----------- -----------
Net cash provided by (used in) operating activities 3,429 (1,005)
Cash flows from investing activities:
Purchase of property, plant and equipment (1,622) (2,138)
Decrease (increase) in restricted cash 2,540 (1,112)
Investment in company accounted for at equity - (133)
Participation in the purchase of property, plant and equipment - 150
Proceeds from sale of property, plant and equipment - 7
Realization of marketable securities - 99
Net cash provided by (used in) investing activities 918 (3,127)
----------- -----------
Cash flows from financing activities:
Proceeds from short -term loans, net 783 6,002
Repayment of long-term loans (5,959) (3,353)
Decrease in short-term bank credit, net (1,060) (2,153)
----------- -----------
Net cash provided by (used in) financing activities (6,236) 496
----------- -----------
Decrease in cash and cash equivalents (1,889) (3,636)
Cash and cash equivalents at the beginning of the year 2,243 5,879
----------- -----------
Cash and cash equivalents at the end of the year 354 2,243
=========== ===========
This information is provided by RNS
The company news service from the London Stock Exchange
END
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