TIDMMTT
RNS Number : 2571J
Metal-Tech Ltd
28 June 2011
28 June 2011
Metal-Tech Ltd.
("Metal-Tech" or "the Company")
Results for the year ended 31 December 2010
Metal-Tech, the producer and recycler of specialty metals such
as Tungsten and Molybdenum, announces the Company's results for the
year ended 31 December 2010.
Financial Summary:
-- Revenue increased by 25% to $45.9m (2009: $36.7m), despite
sales only coming from Tungsten products
-- Gross profit of $0.4m, compared with a gross loss of $7.8m in
2009, reflecting increased Tungsten prices and tight cost
control
-- General and Administrative expenses decreased to $3.8m (2009:
$4.5m) as a result of streamlining the business, including a
reduction in headcount
-- Loss per share of $0.54 (2009: $0.46 loss)
-- Operating expenses amounted to $27.1m (2009: $9.3m),
including an $19.3 (2009: $2.2m) expense incurred by suspended
production plant of Shim-Technology Co. Ltd. (Shim-Tech), the
Company's Mongolian subsidiary
-- Cash, cash deposits and restricted cash balance at 31
December 2010 were $7.3m (31 December 2009: $9.9m)
-- Net cash used in operations was $1.0m (2009: $2.0m gain)
-- Equity at 31 December 2010 is deficit of $1 million (2009:
positive $25.5m)
Operational Summary:
-- Tungsten revenue increased by 66% to $45.9m (2009: $27.6m)
reflecting improved trading conditions
-- Higher demand for Tungsten led to a continued increase in the
metal's price by approximately 27% over the year
-- Tightly managed costs and cash flow to improve efficiency
-- Strong focus maintained on R&D in strategic areas
-- The Company's arbitration case against the Republic of
Uzbekistan asserting that country's unlawful treatment of
Metal-Tech's 50% investment in Uzmetal Technology is ongoing
Current Year and Outlook:
-- Strong trend in sales of Tungsten and increased prices set to
continue
-- Continued focus on resolving outstanding issues while driving
the business forward
-- Maintained disciplined approach to cost control
-- On 31 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
Commenting on the results, Aik Rosenberg, Executive Chairman and
Chief Executive Officer of the Company, said: "Despite the
difficulties the Company encountered with its operations abroad, we
are pleased to report a year of progress and a return to revenue
growth in 2010. The increase in demand for Tungsten saw strong
sales at higher prices than the previous year. These increased
sales alongside the Company's commitment to tight cost controls
resulted in improved margins. Looking ahead, the momentum of strong
demand for Tungsten seen in 2010 has continued and the Company
expect sales of the metal to be higher in 2011 than in the previous
year."
Enquiries:
Metal-Tech
Ariel (Aik) Rosenberg +972 544 215454
Panmure Gordon
Edward Farmer +44 20 7459 3600
Corfin Public Relations
Harry Chathli, Alexis Gore +44 20 7596 2860
Operational Review
Metal-Tech is pleased to report a strong operating performance
and a return to revenue growth in 2010. Revenue increased by 25% to
$45.9m (2009: $36.7m), reflecting improved trading conditions and
significantly higher demand for Tungsten.
Metal-Tech achieved a gross profit of $0.4m in 2010, compared
with a gross loss of $7.8m in 2009, due to tight cost control
measures, higher sales volumes and an approximate 27% increase in
Tungsten prices since the start of 2010.
Tungsten revenue increased by 66% to $45.9m (2009: $27.6m)
reflecting improved trading conditions. As demand increased through
the year, the Company 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 seek other international opportunities for
co-production.
Update on Mongolian Operations
Further to the Company's trading update of 26 April 2011, the
Company has recently been informed that the court in Erdenet has
declared Shim-Tech bankrupt and ordered to freeze its accounts and
seize its assets. As reported, Metal-Tech is taking all necessary
actions in Mongolia to attain a fair and just result for the
Company, including the submission of an appeal which is still
pending as well as submission of its claims as creditor of
Shim-Tech.
Due to the suspension of production in the Mongolian subsidiary
and the Mongolian court decision to declare Shim-Tech as insolvent,
the Company recorded an impairment loss of property, write down of
inventories and other expenses of suspended production plant in
amount of $19.3m.
As a result of the aforementioned legal proceedings, the Company
may no longer control Shim-Tech and therefore will cease to
consolidate the financial statements of Shim-Tech that include as
of the end of the reporting period an excess of liabilities over
assets in the approximate amount of $9.5m.
As of December 31, 2010, the subsidiary had negative equity of
$21.0m and negative working capital of $15.0m.
This factor and the other factors described in the Company's
previous trading updates and in the consolidated financial
statements, including unilateral actions of Erdenet Mining
Corporation, the Company's Mongolian partner, in violation of its
contractual obligation to supply raw material to Shim-Tech, raise
substantial doubts about the subsidiary's ability to continue as a
going concern.
Update on Uzbekistan Action
As announced in January 2010, Metal-Tech filed a Request for
Arbitration against the Republic of Uzbekistan asserting that
country's unlawful treatment of Metal-Tech's 50% investment in
UzMetal-Technology, a joint venture to produce high-quality
molybdenum products. The Request for Arbitration, filed with the
International Centre for Settlement of Investment Disputes (ICSID)
based in Washington, D.C., asserted Uzbekistan's breach of the
Israel-Uzbekistan Bilateral Investment Treaty, as well as
violations of various standards of treatment under international
law and Uzbek legislation.
The current position is that an Arbitral Tribunal comprising a
nominee of the Republic of Uzbekistan, a nominee of the Company and
an independent agreed nominee as the Chair, has been appointed. To
date, both parties have filed their respective submissions before
the Tribunal, including the Company's statement of claim. The
Tribunal has already held sessions in which, inter alia, the agenda
for the proceedings was presented and which are expected to take up
to 18 months to complete.
Focus on R&D
Investment in R&D continued in 2010 to be directed to the
validation of the Company's novel molybdenum extraction technology
expected to yield attractive returns in the short to medium
term.
As stated previously, the Company made a breakthough in 2010 and
is pursuing a joint technical investigation which may lead to a
certain business agreement with a leading mining company following
the validation tests completed on 31 March 2011.
Financial Review
Income statement
Revenues for the year ending 31 December 2010 were $45.9m,
compared with $36.7m for the prior year. Loss attributable to
equity holders was $20.8m (2009: $17.5m loss). This increase is
primarily due to an increase in expenses of the suspended
production plant to $19.3m for the year ending 31 December 2010,
compared with $2.2m for the prior year. Metal-Tech achieved a gross
profit of $0.4m, compared with a gross loss of $7.8m for 2009.
General and Administrative expenses decreased to $3.8m from
$4.5m in the equivalent period last year as a result of cost
cutting exercise, streamlining of the business including a
reduction in headcount.
Balance sheet statement
During the period, cash and cash equivalents decreased from
$9.9m at 31 December 2009 to $7.3million at 31 December 2010.
Current ratio decreased by 21% compared to the position at 31
December 2009. Inventory decreased by $5.4m from $26.5m at 31
December 2009.
The Group has a negative net worth as a result of the suspension
of Shim-Tech plant. As of 31 December 2010, the current liabilities
of the Group relating to said write-off amount to $9.5m.
The Company continues to have a good relationship with its banks
who remain supportive of the business. The Company's debts stand at
$28.6m at 31 December 2010 (31 December 2009: $27.9m). Subsequent
to the end of the reporting period, the Company reached an
agreement with one of the banks regarding rescheduling of its
credit facilities with that bank. The Company is meeting all the
financial covenants.
The global economic slowdown and adverse effect on the pricing
and demand of the Group's products have had an impact on the
Group's operations. In 2010 and 2009, the Group incurred losses of
$27.0m, and $20.0m, respectively and as of December 31, 2010, the
Company has a negative net worth in the amount of $1.0m. As the
Group has not guaranteed the debt of the Shim-Tech, the Company
believes that the negative working capital of Shim-Tech will not
have a material adverse impact on the rest of the Group's liquidity
position. Furthermore, Company management believes that funds
generated from the Group's operations and its present funding
resources and the rescheduling of bank loans will be sufficient to
enable the Group to continue as a going concern and meet its
obligations for at least one year from the end of the reporting
period.
Outlook
The Company has entered 2011 with continued strong demand for
Tungsten and expects sales of the metal to be higher in 2011 than
in the previous year.
STATEMENTS OF FINANCIAL POSITION
U.S. dollars in thousands
December 31,
--------------
2010 2009
------ ------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 2,243 5,879
Restricted cash 5,104 3,992
Available for sale investments - 86
Trade receivables 11,076 9,752
Other accounts receivable 1,201 1,067
Inventories 21,131 26,544
------ ------
40,755 47,320
------ ------
NON-CURRENT ASSETS:
Property, plant and equipment 9,739 26,232
------ ------
Total assets 50,494 73,552
====== ======
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
U.S. dollars in thousands
December 31,
-----------------
2010 2009
-------- -------
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term bank credit 3,762 5,915
Short-term loans and current maturities 17,636 13,218
Loan related to suspended plant 6,787 6,956
Trade payables 8,620 5,562
Other trade payables related to suspended
plant 3,334 2,780
Income taxes payable 5,319 6,981
Other accounts payable 4,507 4,385
49,965 45,797
-------- -------
NON-CURRENT LIABILITIES:
Long-term loans 487 1,863
Employee benefit obligations 506 305
Other liabilities 468 -
Provision for losses in excess of investment
in investee 69 -
1,530 2,168
-------- -------
Total liabilities 51,495 47,965
-------- -------
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 878 714
Accumulated deficit (22,249) (1,418)
-------- -------
4,920 25,587
Non- controlling interests (5,921) -
-------- -------
Total equity (deficit) (1,001) 25,587
-------- -------
Total liabilities and equity 50,494 73,552
======== =======
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
U.S. dollars in thousands (except share and per share data)
Year ended December
31,
----------------------
2010 2009
---------- ----------
Revenues 45,878 36,742
Cost of sales before write-down of inventories 45,471 (*44,572
---------- ----------
Gross profit (loss) before write-down of
inventories 407 (7,830)
Write-down of inventories - 1,497
Gross profit (loss) 407 (9,327)
---------- ----------
Operating expenses:
Research and development expenses ,net 778 655
Selling and marketing expenses 3,119 (*1,822
General and administrative expenses 3,856 4,562
---------- ----------
7,753 7,039
---------- ----------
Operating loss before expenses related to
suspended production plant (7,346) (16,366)
Expenses of suspended production plant 19,308 2,227
---------- ----------
Operating loss (26,654) (18,593)
Finance costs (2,257) (2,455)
Finance income 157 426
Other income (expense), net 3 (16)
Company's share of loss of company accounted
for at equity (202) -
Loss before tax (28,953) (20,638)
Income tax benefit 2,201 165
---------- ----------
Loss for the year (26,752) (20,473)
========== ==========
Total comprehensive loss (26,752) (20,473)
========== ==========
Loss attributable to:
Equity holders of the Company (20,831) (17,469)
Non- controlling interests (5,921) (3,004)
---------- ----------
(26,752) (20,473)
========== ==========
Total comprehensive loss attributable to:
Equity holders of the Company (20,831) (17,469)
Non- controlling interests (5,921) (3,004)
---------- ----------
(26,752) (20,473)
========== ==========
Basic and diluted loss per share attributable
to Ordinary equity holders of the Company (0.54) (0.46)
========== ==========
Weighted average number of shares used in
computing basic and diluted net loss per
share attributable to Ordinary equity holders
of the Company 38,376,923 38,376,923
========== ==========
*) Reclassified - The Company determined that certain
expenditures relating to transportation and shipping should be
classified as selling and marketing expenses and not the cost of
sales in order to better reflect the nature of the expenditures.
Accordingly, comparative data in 2009 amounting to $592 have been
reclassified.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
U.S. dollars in thousands
Attributable to equity holders of the Company
-------------------------------------------------
Other Total
Share Share capital Accumulated Minority 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)
======= ======= ======== =========== ======== ========= =========
Attributable to equity holders of the Company
--------------------------------------------------
Retained
Other earnings
Share Share capital (accumulated Minority Total
capital premium reserves deficit) Total interests equity
------- ------- -------- ------------ -------- --------- --------
Balance as of
January 1,
2009 2,399 23,892 624 16,051 42,966 3,004 45,970
Total
comprehensive
loss - - - (17,469) (17,469) (3,004) (20,473)
Share based
payment - - 90 - 90 - 90
Balance as of
December 31,
2009 2,399 23,892 714 (1,418) 25,587 - 25,587
======= ======= ======== ============ ======== ========= ========
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Year ended December 31,
-------------------------
2010 2009
------------ -----------
Cash flows from operating activities:
Loss for the year (26,752) (20,473)
------------ -----------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Adjustments to the profit or loss items:
Depreciation 2,693 2,335
Impairment of property, plant and equipment 15,711 2,227
Write-down of inventories - 1,497
Amortization and impairment of deferred finance
costs - 528
Gain on marketable securities (13) (58)
Capital gain from sale of property, plant and
equipment (3) (73)
Employee benefit obligations 201 64
Accrued interest and foreign exchange differences
on short and long-term liabilities, net 1,299 1,183
Share based payments 164 90
Deferred taxes - (79)
Company's share of loss of company accounted
for at equity 202 -
Income tax benefit (2,201) (86)
18,053 7,628
------------ -----------
Changes in operating asset and liability items:
Decrease (increase) in trade receivables, net (1,324) 1,401
Decrease (increase)in other accounts receivable (134) 4,125
Decrease in inventory 5,413 19,861
Increase (decrease) in trade payables 3,685 (9,093)
Increase in related parties, net (68) (211)
Increase (decrease) in other accounts payable 1,065 (1,094)
------------ -----------
8,637 14,989
------------ -----------
Cash paid and received during the year for:
Interest received 23 18
Interest paid (1,101) (904)
Income tax received 232 834
Income tax paid (97) (121)
------------ -----------
(943) (173)
------------ -----------
Net cash provided by (used in) operating activities (1,005) 1,971
------------ -----------
Cash flows from investing activities:
Purchase of property, plant and equipment (2,138) (1,148)
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 7 116
Realization of marketable securities 99 -
Increase in restricted cash (1,112) (842)
Net cash used in investing activities (3,127) (1,874)
------------ -----------
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
U.S. dollars in thousands
Year ended December 31,
-------------------------
2010 2009
------------ -----------
Cash flows from financing activities:
Dividend paid - (180)
Proceeds from short -term loans, net 6,002 185
Repayment of long-term loans (3,353) (1,607)
Decrease in short-term bank credit, net (2,153) (4,628)
------- -------
Net cash provided by (used in) financing activities 496 (6,230)
------- -------
Decrease in cash and cash equivalents (3,636) (6,133)
Cash and cash equivalents at the beginning of
the year 5,879 12,012
------- -------
Cash and cash equivalents at the end of the
year 2,243 5,879
======= =======
Significant non- cash transactions:
Purchase of property, plant and equipment on
credit - 73
======= =======
This information is provided by RNS
The company news service from the London Stock Exchange
END
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