RNS Number : 6017D
Metal-Tech Ltd
17 September 2008
17 September 2008
Metal-Tech Announces Half Year Results
Interim Results for the 6 months ended 30 June 2008
Metal-Tech, a leading specialty metal and metal-based chemicals company focusing on converting low-grade raw materials and industrial
waste into higher value metal oxides and metal powders, is pleased to announce its results for the six months ended 30 June 2008. Metal-Tech
produces Tungsten, Molybdenum and other specialty metals used mainly in the steel alloy and cutting-tools industries.
Financial Highlights:
* Revenues from existing operations increased 31% to US$85.2m (H1 2007: US$65.1m).
* Operating Profit US$7.2m (H1 2007: US$9.5), mainly reflecting cost escalation, cost over-runs in Mongolia and US$ exchange rate
impact
* Profit After Tax US$3.8m (H1 2007: US$8.3)
* Earnings per share US$0.10 (H1 2007: US$0.21)
* Strong focus on cash management
* Inventory decreased by US$11.9m
* Cash & Cash equivalents increased US$3.2m to US$15.8m during the period
Operating Highlights
* Strong demand and stable prices
* Substantially new management team in place
* Increasing investment in R&D
* Renewed focus on core skills, technologies and transformational deals
* Progress being made on resolving operation issues in Mongolia
Commenting on the results, Jonathan Ben-Cnaan, Chief Executive Officer of Metal-Tech, said:
"We have accomplished a great deal so far in the year, with new management, disciplined direction of our R&D efforts and a renewed focus
on our core Molybdenum and Tungsten activities. We have taken action to resolve those issues under the Company's direct control and are
taking action to mitigate, where possible, external challenges such as changes in currencies and general cost-inflation in the industry. We
have made significant strides in our pursuit of new business opportunities, with several potentially transformational projects in process.
While these generally take some time to come to fruition, we are encouraged by the high quality of the opportunities that are available to
us. Overall, we expect that these actions will begin to impact positively on the Company's results in the future."
-Ends-
Enquiries:
Metal-Tech Ltd.
Ariel (Aik) Rosenberg, Chairman +972 544 215454
Jonathan Ben-Cnaan, Chief Executive Officer +972 544 232399
Panmure Gordon
Edward Farmer, Stuart Gledhill +44 20 7459 3600
Corfin Communications
Harry Chathli, William Cullum +44 20 7977 0020
Interim Results
Metal-Tech continued to experience strong demand for Molybdenum and Tungsten, and price stability in the first half of the year which
contributed to record revenues of US$85.2m (H1 2007: US$65.1m). The record revenue did not translate into high profits due to cost
escalation of labor and consumables and challenges at the Company's Mongolian plant, which resulted in cost overruns. A 13% decline of the
US dollar, from December 31 2007, against the Israeli Shekel, significantly increased the Company's cost of sales, operating and finance
expenses. The decline in the US dollar has recently reversed somewhat, alleviating some of the effect experienced in the first half of the
year. The Company has begun evaluating possible hedging strategies to mitigate the effect of future fluctuations in the currencies in which
it conducts business.
Metal-Tech's Mongolian plant continued to experience operational challenges during the first half of 2008. This impacted the quantity
produced, relative to the plant's designed capacity, and negatively impacted quality. Progress has been made on resolving these issues.
The Mongolian plant has experienced significant cost inflation driven by increases in labour, raw materials and energy. The Company
expects that increased operational leverage and improved quality in the fourth quarter of 2008 will provide some counter-balance to these
cost pressures.
While R&D expense was in line with the first half of 2007 the Company intends to increase its investment in this area in subsequent
periods as part of its focused drive to develop, and leverage, additional proprietary technologies and know-how. In line with the Company's
decision to base its future development on proprietary technology and knowhow, R&D is being directed to support new business development
initiatives, with an emphasis on high return opportunities. In this regard, the Company is evaluating the potential for the establishment
of a spent catalyst processing plant; additionally it is currently running a pilot plant for a new multi-element hydrometallurgy process
that it has developed. As previously announced, the Company, in partnership with Compania Electro Metalurgica S.A., has been selected by
CorporaciNacional del Cobre del Chile ("Codelco"), as one of five finalists in an international bid process, to participate in its
Technological Development For Slag Processing project.
Following a strategic review Metal-Tech has made the decision to diversify the geographic focus of its current business development
efforts to include the Americas. The Company has also decided to exit non-core businesses in which it had previously been active, namely
metal trading and mine development. Collectively, these changes are intended to reduce the risks to which the Company is exposed while
sharpening its focus.
Financials
Revenues for the six months ending 30 June 2008 were US$85.2m, up from US$65.1m during the same period of 2007, an increase of 31%. Net
profit was US$3.8m, down from US$8.3m, a decrease of 55%. Gross profit was US$12.3m, 14.4% of sales, vs. US$13.1m and 20% respectively.
During the period, cash and cash equivalents increased US$3.2m to US$15.8m. Overall, working capital has remained at approximately the
same level compared to 31 Dec. 2007. Inventory decreased by US$11.9m from US$69.5 at 31 December 2007 reflecting an effort to reduce
existing inventory levels. Receivables increased from US$10.5m to US$22.4m, partially due to high sales towards the end of the quarter. The
Company deems the existing working capital invested in the business to be higher than necessary and expects to reduce this level over the
coming periods, freeing up cash for other purposes.
General and Administrative expenses increased from $2.5m in the six month period ended 30 June 2007 to $3.7 in the six month period
ended 30 June 2008. This increase was the result of several factors, including increased investment in new business development activity,
new management, cost inflation and the weak US Dollar.
Outlook
The Company expects to continue making operational improvements over the coming periods, which are intended to increase capacity and
improve the quality of its products. The Company is investing in its future by recruiting seasoned managers with international experience,
increasing R&D expenditure, and increasing business development activity areas in which it believes it can leverage its proprietary
technologies and know-how.
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands (except shares and per share amounts)
Unaudited six months, Audited 12 months
ended 30 June, ended
31 December,
2008 2007 2007
Revenues 85,151 65,079 136,713
Cost of revenues 72,833 52,028 116,971
Gross profit 12,318 13,051 19,742
Research and development 851 721 1,991
expenses, net
Selling and marketing expenses 535 370 775
General and administrative 3,749 2,462 4,661
expenses
Total operating expenses 5,135 3,553 7,427
Operating income 7,183 9,498 12,315
Financial expenses, net 2,617 256 2,294
Other income (expense), net (79) (13) 219
Share of income (losses) of (6,891)
joint ventures including 499 (203)
impairment loss
Profit before tax 4,986 9,026 3,349
Income tax expenses 1,211 742 4,084
Profit (loss) for the period 3,775 8,284 (735)
Attributable to:
Equity holders of the Company 2,669 7,923 (2,008)
Minority interest 1,106 361 1,273
3,775 8,284 (735)
Basic and diluted earnings (0.02)
(loss) per share attributable
to Ordinary equity holders of
the Company Basic and diluted 0.1 0.21
earnings per share
Weighted average number of 38,376,923
shares used in computing basic
and diluted net earnings
(loss) per share attributable
to Ordinary equity holders of
the Company 38,376,923 38,376,923
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
Unaudited Audited
30 June, 31
Decembe
Note r,
2008 2007 2007
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 9,177 19,008 5,939
Restricted cash 6,561 - 6,561
Available for sale marketable 82 1,569 95
securities
Trade receivables 22,373 19,635 10,543
Other accounts receivable 4,502 3,748 9,973
Inventories 57,644 56,789 69,527
Total current assets 100,339 100,749 102,638
NON-CURRENT ASSETS
Investment in joint ventures 3 4,842 10,803 4,183
Deferred finance costs 453 755 528
Deferred taxes 375 2,622 415
Long term deposits 13
Property, plant and equipment, net 28,170 23,694 26,022
Total non-current assets 33,840 37,887 31,148
TOTAL ASSETS 134,179 138,636 133,786
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share data)
Unaudited Audited
30 June, 31
December,
2008 2007 2007
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank credit 11,337 14,240 11,381
Short-term loans and current maturities 19,608 6,799 17,130
Trade payables 23,616 35,827 26,044
Related parties 201 366 202
Other accounts payable 13,894 11,916 16,744
Total current liabilities 68,656 69,148 71,501
LONG-TERM LIABILITIES:
Long-term loans 6,488 3,331 6,436
Deferred tax liabilities 461 401 453
Severance pay liability 213 443 477
Total non-current liabilities 7,162 4,175 7,366
EQUITY:
Ordinary shares 2,399 2,399 2,399
Share premium 24,269 23,892 24,398
Capital reserve (296) (52) (81)
Capital note 375
Retained earnings (accumulated deficit) 27,845 36,593 25,176
54,217 63,207 51,892
MINORITY INTEREST 4,144 2,106 3,027
Total Equity 58,361 65,313 54,919
Total Liabilities and Equity 134,179 138,636 133,786
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
U.S. dollars in thousands
Share Share Capital Capital Retained
capital premium reserve note earnings Total
Balance at 1 January , 2007 2,399 23,892 (136) - 28,373 54,528
(audited)
Cost of share based payment 506 506
Net loss on cash flow hedges (85) (85)
Foreign currency translation - - 140 - 140
reserve
Dividend paid - - - - (1,189) (1,189)
t loss - - - - (2,008) (2,008)
Balance at 31 December , 2007 2,399 24,398 (81) - 25,176 51,892
(audited)
Balance as of 1 January, 2007 2,399 23,892 (136) 375 29,870 56,400
(audited)
Foreign currency translation - - 83 - - 83
reserve
Option grants to employees - - 64 - - 64
Loss from hedging transactions - - (63) - - (63)
Final Dividend for 2006 - - - - (1,200) (1,200)
Net profit - - - 7,923 7,923
Balance at 30 June, 2007 2,399 23,892 (52) 375 36,593 63,207
(unaudited)
Balance as of 1 January, 2008 2,399 24,398 (81) - 25,176 51,892
(audited)
Cost of share based payment (129) (129)
Net loss on cash flow hedges (215) (215)
Net profit 2,669 2,669
Balance at 30 June, 2008 2,399 24,269 (296) - 27,845 54,217
(unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Unaudited Audited
six months ended 12 months ended 31
30 June, December,
2008 2007 2007
Cash flows from operating
activities:
Profit (loss) for the year 3,775 8,274 (735)
Adjustments required to (9,211)
reconcile net income to net 719 (3,427)
cash provided by (used in)
operating activities (a)
Net cash flow provided by 4,494 4,847 (9,946)
(used in) operating activities
Cash flows from investing
activities:
Purchase of property, plant (3,609) (3,773) (7,193)
and equipment
Proceeds from sale of 70 39 54
property, plant and equipment
Long-term deposits, net (13)
Investment in joint ventures (1,634) (1,420)
Decrease (increase) in 1,898 (4,663)
restricted cash
Deconsolidation of a
subsidiary (d)
Investment in marketable (736) 747
securities, net
Net cash used in investing (3,539) (4,219) (12,475)
activities
Cash flows from financing
activities:
Dividend paid - (249)
Proceeds from short and 3,159 6,153 19,457
long-term loans
Repayment of short and (832) (7,446) (7,662)
long-term loans
Decrease (increase) in (44) 3,918 1,059
short-term bank credit, net
Net cash provided by financing 2,283 2,625 12,605
activities
Increase (decrease) in cash 3,238 3,253 (9,816)
and cash equivalents
Cash and cash equivalents at 5,939 15,755 15,755
the beginning of the year
Cash and cash equivalents at 9,177 19,008 5,939
the end of the period
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Unaudited Audited
30 June, 31
December,
2008 2007 2007
(a) Adjustments required to reconcile net income to net cash
provided by (used in) operating activities:
Income and expenses not involving cash flows:
Depreciation 1,304 906 1,756
Amortization of deferred finance costs 152 75 151
Share of (income) losses of joint ventures including 6,891
impairment (564) 241
Unrealized gains (210) -
Severance pay liability (264) 21 55
Accrued interest and foreign exchange differences on (118)
short and long-term liabilities, net 203 97
Capital losses (gains) on sales of fixed assets 87 (12)
Cost of share based payments (129) 64 506
Securities revaluation 13 (27)
Deferred taxes 48 (191) 2,068
Other 11 (31)
861 964 11,278
Changes in operating assets and liabilities:
Decrease in related parties, net (637) (801)
Decrease (increase) in trade receivables, net (11,830) (6,315) 2,777
Decrease (increase) in other accounts receivable 5,299 (2,784) (8,858)
Decrease (increase) in inventory 11,883 (15,787) (28,525)
Increase (decrease) in trade payables (6,380) 21,205 11,422
Increase (decrease) in other accounts payable 886 (73) 3,496
(142) (4,391) (20,489)
719 (3,427) (9,211)
The accompanying notes are an integral part of the consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL:
The interim financial statement as of 30 June 2008 and for the six month period then ended (hereafter - the interim statements) were
prepared in condensed form in accordance with IAS 34 - "Interim Financial Reporting".
The accounting policies applied in preparation of the interim financial statements are consistent with those used in the 2007 annual
financial statements but have not been audited by the auditors. Nevertheless, the interim statements do not include all the information and
explanations required for annual financial statements, and should be read in conjunction with the 2007 annual financial statements.
Costs incurred unevenly during the year are brought forward or deferred, for interim reporting purposes if, and only if, such costs may
be brought forward or deferred in the annual reporting.
Taxes on income for the interim statements are included based on the best estimate of the anticipated average annual tax expense for the
entire year; changes in said estimate, as well as changes in the amount of the tax saving to be utilized in the following years, are
included as an expense for the current period.
NOTE 2 - REVENUES BY GEOGRAPHICAL SECTOR
Revenues classified by geographical destinations based on the customer location:
Unaudited six months, Audited 12 months ended
Ended 30 June, 31 December,
2008 2007 2007
USD'000 USD'000 USD'000
United States 18,548 14,234 32,595
China 2,432 11,386 13,700
Japan 15,937 3,547 10,434
Korea 18,986 21,233 42,089
Europe 20,961 9,615 29,388
Israel 274 901 937
Others 8,013 4,163 7,570
85,151 65,079 136,713
NOTE 3 - Investment in joint ventures:
The Company has a 50% interest in Uzmetal, and at 30 June, 2008 had a 49% interest in BIT Metals
Uzmetal -
Uzmetal was consolidated in the financial statements of operation until June 30, 2006. For the period commencing July 1, 2006 and ending
June 30, 2007, Uzmetal, a jointly controlled entity, was accounted for in the consolidated financial statements using the equity method.
Audited 12 months ended
31 December,
2007
USD'000
Share of attributable net assets 5,032
Carrying amount of loans 4,390
Unrealized gains (2,617)
6,776
BIT Metals -
On August 1, 2008, the company sold its investment in an associated company BIT Metals, to a third party for consideration. As a result,
BIT Metals repaid its obligations to the Company, in the amount of $3,000,000, in addition to accrued interest. The final sale price will be
determined based on the audited financial statements of BIT Metals for the period ending December 31, 2008.
Unaudited six months, Audited 12 months ended
Ended 30 June, 31 December,
2008 2007
USD'000 USD'000
4,027
Carrying amount of the 4,842
investment
This information is provided by RNS
The company news service from the London Stock Exchange
END
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