Shawcor Ltd. (“Shawcor” or the “Company”) (TSX: SCL) reported today
its operational and financial results for the three and six months
ended June 30, 2022. This press release should be read in
conjunction with the Company’s Management Discussion and Analysis
(MD&A) and interim consolidated financial statements for the
three and six months ended June 30, 2022, which are available on
the Company’s website and at www.sedar.com.
Highlights from the second quarter include:
- On a consolidated basis, revenue
was $307.0 million, operating income was $33.7 million and Adjusted
EBITDA1 was $31.5 million
- Composite Systems segment revenue
increased by 40%, to $135 million compared with $97 million in the
prior year’s quarter;
- Automotive and Industrial segment
revenue increased by 19% to $79 million compared with $67 million
in the prior year’s quarter;
- Pipeline and Pipe Services segment
revenue decreased by 35% to $93 million compared with $143 million
in the prior year’s quarter;
- Shawcor’s businesses serving
infrastructure & industrial end markets represented 46% of
total revenue during the second quarter of 2022, compared to 40% in
the second quarter of 2021;
- Order backlog for execution in the
next 12 months rose by 11% to $779 million as at June 30, 2022,
compared to $702 million as at March 31, 2022. This increase
reflects continued growth in businesses serving infrastructure
& industrial markets as well as several offshore pipe coating
contracts which were secured or moved into the coming 12-month
window during the quarter;
- Received $49 million for the
completed sale and three-year lease-back of its Rexdale facility in
Toronto;
- Secured $15 million in net cash
savings over the next seven years with early exit from a leased
facility in Calgary;
- Received $5 million for the sale of
assets and exit from the Global Poly product line, previously part
of the Composites Systems reporting segment;
- Invested in working capital to
support near-term growth resulting in $8.8 million of cash used in
operating activities during the quarter;
- As at June 30, 2022, the Company
had total net debt of $207.1 million. Since the beginning of 2021,
the Company has made debt repayments of $153.5 million and in that
same period has improved its trailing twelve-month Net Debt to
Adjusted EBITDA1 ratio to approximately 2.0 times through its focus
on improving business performance, reducing costs and disposing of
non-core assets;
“During the second quarter Shawcor continued to
execute on its strategic plan, prioritizing the development and
delivery of differentiated, high value, materials-based solutions
in support of industrial and critical infrastructure end markets,
while continuing the optimization of our portfolio.” said Mike
Reeves, President & CEO of Shawcor.
| 1 EBITDA,
Adjusted EBITDA and Net debt-to-Adjusted EBITDA are Non-GAAP
measures. Non-GAAP measures do not have standardized meanings under
GAAP and are not necessarily comparable to similar measures
provided by other companies. See Section 5.0 – Reconciliation of
Non-GAAP Measures for further details and a reconciliation of these
Non-GAAP measures. The Company expects the current calculation
methodology of Adjusted EBITDA to be consistently applied in future
periods. |
“Strong operational execution within all
business segments led to robust sequential and year-over-year
revenue growth, margin improvement and 12-month backlog expansion
during the second quarter. We continue to see constructive market
conditions for Shawcor’s high value products and services across
virtually all end markets and are confident in a developing
multi-year offshore pipe coating up-cycle.”
“Shawcor operates a business portfolio that is
naturally resilient in recessionary cycles, and although we remain
vigilant in the face of continued global supply chain tightness,
inflationary fluctuations and geopolitical volatility, we believe
the Company is well positioned to navigate market volatility. We
continue to expect Adjusted EBITDA1 in the second half of the year
to be substantially higher than the first half of this year.”
Selected Financial Highlights
|
(in thousands of Canadian dollars, except per share amounts and
percentages) |
Three Months Ended June 30 |
Six Months Ended June 30 |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
$ |
% |
$ |
% |
$ |
% |
$ |
% |
|
Revenue |
307,018 |
|
305,895 |
|
574,812 |
|
585,226 |
|
|
|
Gross profit |
86,087 |
28.0 |
% |
89,879 |
29.4 |
% |
158,930 |
27.6 |
% |
163,614 |
|
28.0 |
% |
|
Income from Operations(a) |
33,717 |
11.0 |
% |
10,434 |
3.4 |
% |
35,051 |
6.1 |
% |
5,834 |
|
1.0 |
% |
|
Net Income (Loss) for the period(b) |
20,352 |
|
2,647 |
|
13,410 |
|
(12,725 |
) |
|
|
Earnings (Loss) per share: |
|
|
|
|
|
|
|
|
|
Basic |
0.29 |
|
0.04 |
|
0.19 |
|
(0.18 |
) |
|
|
Diluted |
0.29 |
|
0.04 |
|
0.19 |
|
(0.18 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA(c) |
31,472 |
10.3 |
% |
35,206 |
11.5 |
% |
51,506 |
9.0 |
% |
53,772 |
|
9.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Operating income in the three months ended June 30, 2022
includes $43.1 million of gains on sale of land and other, $20.3
million of impairment charges and $3.0 million of restructuring
costs and other, net; while three months ended June 30, 2021
includes $5.2 million of restructuring costs and other, net and
$3.1 million in COVID-19 related government wage subsidy. Operating
income in six months ended June 30, 2022 includes $43.0 million of
gain on sale of land and other, $20.3 million of impairment charges
and $4.2 million of restructuring costs and other, net; while six
months ended June 30, 2021 includes $8.6 million of restructuring
costs and other, net and $5.4 million in COVID-19 related
government wage subsidy. |
|
(b) Attributable to shareholders of the Company. |
|
(c) Adjusted EBITDA is a non-GAAP measure. Non-GAAP measures do not
have standardized meanings prescribed by GAAP and are not
necessarily comparable to similar measures provided by other
companies. See Section 5.0 – Reconciliation of Non-GAAP Measures
for further details and a reconciliation of these Non-GAAP
measures. |
1.0 SECOND QUARTER
HIGHLIGHTS
Adjusted EBITDA1 of $31.5 million in the second
quarter of 2022 was better than expected, with particularly strong
performance in both the Automotive and Industrial and Composite
Systems segments attributed to strong demand for higher margin wire
and cabling products and composite pipe products. The 2022 second
quarter Adjusted EBITDA1 result was 11% lower than the second
quarter of 2021, primarily on the comparatively lower pipe coating
project activity in the quarter, partially offset by aforementioned
strong performance in the Company’s other two segments. The
Company’s sales into infrastructure & industrial end markets
accounted for over 46% of total revenue during the second quarter,
compared to less than 40% in the second quarter of 2021.
| 1 EBITDA
and Adjusted EBITDA are Non-GAAP measures. Non-GAAP measures do not
have standardized meanings under GAAP and are not necessarily
comparable to similar measures provided by other companies. See
Section 5.0 – Reconciliation of Non-GAAP Measures for further
details and a reconciliation of these Non-GAAP Measures. The
Company expects the current calculation methodology of Adjusted
EBITDA to be consistently applied in future periods. |
In the second quarter of 2022, the Company
recorded impairment charges of $20.3 million after performing
evaluations in support of its ongoing strategy of portfolio
optimization. The impairment charges included property, plant and
equipment and intangible assets for Shaw Pipeline Services of $8.1
million, property, plant and equipment for Oilfield Asset
Management of $6.2 million, property, plant and equipment for Lake
Superior Consulting of $1.9 million, property, plant and equipment
in Socotherm Argentina for $2.9 million and assets in Saudi Arabia
within Composite Production Systems of $1.1 million.
Since March of 2020, the Company has undertaken
the controlled shutdown or sale of several girth weld inspection
branches and 9 fixed pipe coating facilities to reduce its
operating cost base and has continued to focus on cost
optimization. In the second quarter of 2022, the Company completed
the sale of its previously closed pipe coating facility in Adria,
Italy. The Company also further reduced its operating footprint
with the early exit of a leased manufacturing facility not required
to maintain existing and expected operations in Calgary. As a
result of this transaction and other restructuring activities, the
Company recorded $3.0 million of net restructuring and other
costs.
Additionally, in the second quarter of 2022, the
Company continued to execute on its strategy to optimize its
portfolio. Actions included finalization of the sale and leaseback
agreement for its Rexdale facility in Toronto, as well as the sale
of assets related to the Global Poly product line, previously part
of the Composites Systems reporting segment, which resulted in
combined gains on sale of land and other of $43.0 million.
Contributions from Global Poly in 2021 and the first half of 2022
were approximately $24.4 million and $18.4 million in revenue
respectively, and negative $0.3 million and positive $1.4 million
in Adjusted EBITDA1 respectively.
As at June 30, 2022, the Company had cash and
cash equivalents totaling $115.8 million, an increase from $85.8
million as at March 31, 2022 (December 31, 2021 – $124.4 million).
This increase was primarily due to the receipt of $55.4 million in
proceeds from the sale of property, plant and equipment, partially
offset by $8.8 million spent to fund operations, reflecting an
investment of $26.1 million in working capital excluding the impact
of restructuring liabilities, and $10.5 million in growth and
maintenance capital expenditures. Since the beginning of 2021, the
Company has repaid $153.5 million of long-term debt. The Company
will continue to focus on maximizing the conversion of operating
income into cash to continue repaying long term debt, support its
strategy of portfolio optimization and explore M&A
opportunities.
| 1 EBITDA
and Adjusted EBITDA are Non-GAAP measures. Non-GAAP measures do not
have standardized meanings under GAAP and are not necessarily
comparable to similar measures provided by other companies. See
Section 5.0 – Reconciliation of Non-GAAP Measures for further
details and a reconciliation of these Non-GAAP Measures. The
Company expects the current calculation methodology of Adjusted
EBITDA to be consistently applied in future period. |
Selected Segment Financial
Highlights
|
|
Three Months Ended |
Six Months Ended |
|
|
June 30, |
June 30, |
June 30, |
June 30, |
|
|
2022 |
2021 |
2022 |
2021 |
|
(in thousands of Canadian dollars) |
($) |
(%) |
($) |
(%) |
($) |
(%) |
($) |
(%) |
|
Revenue |
|
|
|
|
|
|
|
|
|
Composite Systems |
135,443 |
|
|
96,756 |
|
|
241,856 |
|
|
167,877 |
|
|
|
Automotive and Industrial |
79,349 |
|
|
66,662 |
|
|
157,568 |
|
|
130,412 |
|
|
|
Pipeline and Pipe Services |
93,393 |
|
|
142,555 |
|
|
177,461 |
|
|
287,073 |
|
|
|
Elimination(a) |
(1,167 |
) |
|
(78 |
) |
|
(2,073 |
) |
|
(137 |
) |
|
|
Consolidated revenue |
307,018 |
|
|
305,895 |
|
|
574,812 |
|
|
585,226 |
|
|
|
Operating income (loss) |
|
|
|
|
|
|
|
|
|
Composite Systems |
9,521 |
|
7.0 |
% |
8,151 |
|
8.4 |
% |
16,395 |
|
6.8 |
% |
8,818 |
|
5.3 |
% |
|
Automotive and Industrial |
14,832 |
|
18.7 |
% |
9,520 |
|
14.3 |
% |
29,719 |
|
18.9 |
% |
20,956 |
|
16.1 |
% |
|
Pipeline and Pipe Services |
(22,494 |
) |
(24.1 |
%) |
(2,202 |
) |
(1.5 |
%) |
(38,674 |
) |
(21.8 |
%) |
(11,702 |
) |
(4.1 |
%) |
|
Financial and Corporate |
31,858 |
|
|
(5,035 |
) |
|
27,611 |
|
|
(12,238 |
) |
|
|
Operating income |
33,717 |
|
11.0 |
% |
10,434 |
|
3.4 |
% |
35,051 |
|
6.0 |
% |
5,834 |
|
1.0 |
% |
|
Adjusted EBITDA(b) |
|
|
|
|
|
|
|
|
|
Composite Systems |
22,871 |
|
16.9 |
% |
15,851 |
|
16.4 |
% |
37,577 |
|
15.5 |
% |
24,397 |
|
14.5 |
% |
|
Automotive and Industrial |
15,945 |
|
20.1 |
% |
10,667 |
|
16.0 |
% |
31,944 |
|
20.3 |
% |
23,245 |
|
17.8 |
% |
|
Pipeline and Pipe Services |
(798 |
) |
(0.9 |
%) |
12,993 |
|
9.1 |
% |
(8,249 |
) |
(4.6 |
%) |
17,039 |
|
5.9 |
% |
|
Financial and Corporate |
(6,546 |
) |
|
(4,305 |
) |
|
(9,766 |
) |
|
(10,909 |
) |
|
|
Adjusted EBITDA(b) |
31,472 |
|
10.3 |
% |
35,206 |
|
11.5 |
% |
51,506 |
|
9.0 |
% |
53,772 |
|
9.2 |
% |
|
|
|
(a) Represents the elimination of the inter-segment
sales between the Composite Systems segment, the Automotive and
Industrial segment and the Pipeline and Pipe Services
segment.(b) Adjusted EBITDA is a non-GAAP measure.
Non-GAAP measures do not have a standardized meaning prescribed by
GAAP and are not necessarily comparable to similar measures
provided by other companies. See Section 5.0 – Reconciliation of
Non-GAAP Measures for further details and a reconciliation of these
Non-GAAP measures. |
Revenue in the second quarter of 2022 for
Composite Systems increased by $38.7 million, or 40%, compared to
the second quarter of 2021, with an operating income of $9.5
million. This increase was primarily attributed to strong order
activity for composite pipe products, which benefitted from higher
completion activity levels in North America, particularly with
larger operators, as well as market share gain in the US. Demand
for retail fuel and water/wastewater fiber reinforced plastic
(“FRP”) tanks remained strong, with production increasing versus
the prior year quarter. The rise in revenue also reflects a roll
out of price increases to help offset the increase in raw material
and labour costs in all businesses. Adjusted EBITDA1 in the second
quarter of 2022 was $22.9 million, a 44% increase compared to $15.9
million in the second quarter of 2021. This increase is due, in
large part, to the previously mentioned robust order deliveries for
composite pipe.
The Automotive and Industrial segment maintained
its strong performance, delivering new record revenue of $79.3
million, which represents an increase of 19% versus the second
quarter of 2021, with an operating income of $14.8 million. This
record revenue is primarily due to strong project-based activity in
industrial markets, particularly in the North American nuclear,
communications and transportation markets. The segment delivered
strong quarterly Adjusted EBITDA1 of $15.9 million, a 49% increase
over the prior year quarter, largely stemming from higher demand in
industrial markets and bolstered by a more profitable product
mix.
| 1 EBITDA
and Adjusted EBITDA are Non-GAAP measures. Non-GAAP measures do not
have standardized meanings under GAAP and are not necessarily
comparable to similar measures provided by other companies. See
Section 5.0 – Reconciliation of Non-GAAP Measures for further
details and a reconciliation of these Non-GAAP Measures. The
Company expects the current calculation methodology of Adjusted
EBITDA to be consistently applied in future period. |
Performance in the Pipeline and Pipe Services
segment was as expected, with an operating loss and near breakeven
Adjusted EBITDA1 in the second quarter of 2022 resulting from low
activity levels across the business. The Pipeline and Pipe Services
segment generated revenue of $93.4 million, a decrease of $49.2
million, or 35%, from $142.6 million in the second quarter of 2021,
with an operating loss of $22.5 million. This revenue decline was
due to lower large pipe coating project activity in Europe, Middle
East and Africa (“EMEA”)2, Latin America and Asia Pacific as well
as the absence of $9.5 million of revenue attributable to the
Shawcor Inspection Services business that was sold in December
2021. Adjusted EBITDA1 in the second quarter of 2022 was negative
$0.8 million, a decrease compared to the positive $13.0 million
reported in the second quarter of 2021 primarily related to the low
levels of pipe coating project activity when compared to the prior
year. Despite the year-over-year decrease in revenue and Adjusted
EBITDA1, the Company’s cost reduction and site optimization
initiatives have substantially lowered fixed expenses for the
segment which, in turn, partially offset the lower activity levels
in the quarter.
The twelve-month order backlog of $779 million
as at June 30, 2022, represents an 11% increase over the $702
million order backlog as at March 31, 2022. This growth was
attributed to stronger pipe coating backlog as well as continued
growth in demand for the Company’s infrastructure and industrial
offerings. The backlog includes firm customer contracts which will
be executed over the next twelve months and is indicative of a
generally stronger outlook for all of our current product
lines.
Outstanding firm bids were nearly $1.5 billion
as of June 30, 2022, an increase versus the $946 million from the
previous quarter largely attributed to several projects that moved
from budgetary to bid during the quarter. Conditional awards,
pending final investment decision, were at $61 million, up slightly
from the $56 million recorded in the prior quarter. Budgetary
estimates were nearly $1.2 billion at the end of the second
quarter, a decrease from the budgetary value of $1.5 billion from
the previous quarter as movement of projects from budgetary to bid
exceeded the addition of new projects into budgetary.
2.0 OUTLOOKThe
Company expects earnings in the second half of 2022 to be
substantially higher than the first half of the year. The
underlying business trends for all of Shawcor’s primary businesses
remain favourable as its infrastructure and industrial focused
portfolio continues to experience consistent demand growth, while
the Company’s oil and gas focused offerings remain well-positioned
as commodity prices and energy availability challenges drive for a
multi-year upcycle in both onshore and offshore activity. Looking
forward for the remainder of 2022, raw material and labour costs
continue to rise and, as a result, the Company will continue to
monitor its pricing and roll out price increases to help offset the
cost increases it experiences. Supply chain volatility is expected
to continue, including availability of gas supply to suppliers,
customers and Shawcor’s plant in Europe which may present
challenges through the balance of 2022.
The Company has substantially rationalized its
footprint, including the divestiture of non-core businesses, and
will continue to focus on optimizing and maintaining efficient
operations with the technical expertise and geographic footprint
that provide the best opportunity for the Company to secure work
and drive profitability, particularly as pipe coating project
activity is anticipated to pick up during the second half of
2022.
| 1 EBITDA
and Adjusted EBITDA are Non-GAAP measures. Non-GAAP measures do not
have standardized meanings under GAAP and are not necessarily
comparable to similar measures provided by other companies. See
Section 5.0 – Reconciliation of Non-GAAP Measures for further
details and a reconciliation of these Non-GAAP Measures. |
| 2 The
EMEA geographic location group was previously referred to by the
Company as EMAR (Europe, Middle East, Africa and Russia). The
Company has updated this group reference to more appropriately
reflect the geographic locations where the Company conducts its
business and where the majority of customers are. |
Backlog is expected to continue to grow through
the rest of 2022 as customers seek to secure orders for the
Company’s infrastructure and industrial offerings, several pipe
coating projects reach final investment decision and contract
awards move into the 12-month period. Execution on work secured in
the Company’s backlog is expected to increase in the second half of
2022 as FRP tank resin supply shortages alleviate and coating
activities for newly sanctioned pipeline projects commence.
Composite Systems Segment
The Company is expecting robust demand for
underground FRP tanks to continue throughout 2022 as retail fuel
service station networks expand, upgrade and replace existing aging
tanks. In addition, growth in demand for water and storm-water
storage and treatment systems is expected to continue, supported by
increasing societal demands to conserve and manage water resources,
and projected higher infrastructure spending on commercial and
municipal water projects. Specific supply chain constraints which
have tempered FRP tank production output during the first half of
the year are anticipated to ease over the course of the second half
of 2022. In addition to qualifying alternative raw material
sources, the business continues to manage production schedules and
lead times to minimize impacts, and price surcharges have been
implemented to manage raw material cost increases. Additionally,
labour shortages and capacity constraints are being managed to
ensure adequate personnel and facilities are available to meet the
robust demand in the market. Growth in demand for the segment’s
core composite pipe products and tubular management services in
North America are expected to continue as activity levels in
Western Canada and in the Permian Basin gradually rise. Further
opportunities for the Company’s composite pipe products are
expected as the commercial adoption of larger diameter products
continues.
Automotive and Industrial
Segment
Activity levels within the Automotive and
Industrial segment are expected to remain high throughout 2022,
though not at the level experienced in the first half of the year,
which benefitted from increased demand for higher margin nuclear
and other industrial products as project-based work continued.
While the Company expects that industrial markets will dominate
demand for the segment’s products, demand for the Company’s heat
shrinkable tubing products within the automotive sector is expected
to continue to outpace overall automotive production as a result of
electronic content growth in premium, hybrid and full electric
vehicle markets, particularly in the Asia Pacific and EMEA regions.
Broad supply chain impacts, including the global semiconductor
shortage, and energy supply shortages related to the Russia-Ukraine
conflict continue to create challenges for automotive manufacturers
and consequently the Company’s full year outlook does not
incorporate any expectation of meaningful growth in total global
vehicle output. The Company’s diversified geographies and end
markets are expected to provide insulation from the near-term
impacts of these automotive industry challenges. On the industrial
side of the business, which represented approximately 70% of the
Segment’s revenue in Q2 2022, the Company is expecting to benefit
from continued infrastructure spending as new and upgraded
communication networks are constructed, nuclear refurbishments
continue in Canada, and federal stimulus packages are rolled out,
while continuing to effectively manage the volatility of copper raw
material costs.
Pipeline and Pipe Services
Segment
The Company continues to expect progressive
growth throughout the year in its Pipeline and Pipe Services
segment as seasonal activity picks up and the segment begins to
execute on the increasing volume of work that has been secured in
its backlog. The Company continues to monitor international
developments including sustained exploration success and additional
project phases in Guyana and Brazil, and Middle Eastern offshore
projects designed to meet domestic energy needs and global LNG
demand. Increases in inbound subsea orders have been observed
across the Company’s customer base, particularly in Brazil and
Norway where the Company is well-positioned to secure and execute
work. Activity levels in Western Canada are expected to remain
strong, yielding steady demand for small diameter coating
solutions. New offshore pipeline installations that range from
small and mid-size to large in scope, are expected to arise during
the second half of 2022 and into subsequent years, driving elevated
demand for the Company’s market leading pipe coating technologies.
The Company has maintained the resources needed to execute on
projects currently in backlog in which coating is scheduled to
commence in the second half of the year.
3.0 CONFERENCE CALL AND
ADDITIONAL INFORMATION
Shawcor will be hosting a Shareholder and
Analyst Conference Call and Webcast on Friday, August 12th, 2022 at
9:00 AM ET, which will discuss the Company’s Second Quarter 2022
Financial Results. To participate via
telephone, please register at
https://register.vevent.com/register/BI8488fd08cf064e03a349ff656bbef5c6
and a telephone number and pin will be provided.
Alternatively, please go to the following
website address to participate via webcast:
https://edge.media-server.com/mmc/p/4zczouq9. The webcast recording
will be available within 24 hours of the live presentation and will
be accessible for 90 days.
About Shawcor
Shawcor Ltd. is a growth-oriented, global
material sciences company serving the Infrastructure, Energy, and
Transportation markets. The Company operates through a network of
fixed and mobile manufacturing and service facilities. Its three
business segments, Composite Systems, Automotive and Industrial and
Pipeline and Pipe Services enable responsible renewal and
enhancement of critical infrastructure while lowering risk and
environmental impact.
For further information, please contact:
Meghan MacEachernDirector, External
Communications & ESGTel: 437-341-1848Email:
meghan.maceachern@shawcor.com Website: www.shawcor.com
Source: Shawcor
Ltd.Shawcor.ER4.0 FORWARD-LOOKING
INFORMATION This news release includes certain
statements that reflect management’s expectations and objectives
for the Company’s future performance, opportunities and growth,
which statements constitute "forward-looking information" and
"forward-looking statements" (collectively "forward-looking
information") under applicable securities laws. Such statements,
other than statements of historical fact, are predictive in nature
or depend on future events or conditions. Forward-looking
information involves estimates, assumptions, judgements and
uncertainties. These statements may be identified by the use of
forward-looking terminology such as "may", "will", "should",
"anticipate", "expect", "believe", "predict", "estimate",
"continue", "intend", "plan" and variations of these words or other
similar expressions. Specifically, this news release includes
forward-looking information in the Outlook Section and elsewhere in
respect of, among other things, the ability of the Company to
deliver higher returns to all stakeholders; the level of the
Company’s anticipated overall financial performance in 2022; the
Company’s focus on maximizing the conversion of operating income
into cash and the uses thereof; continuing demand growth in the
Company’s infrastructure and industrial focused offerings; the
impact from the potential upcycle in commodity prices and related
activities on the Company’s oil and gas focused offerings; the
level of quarterly normalized SG&A; the optimization of the
Company’s portfolio by means of selective acquisitions and
divestitures; the continuance of certain raw material shortages and
supply chain disruptions for the second half of 2022 and the
abatement of others in this same timeframe; the demand for the
Company’s products in each of its business segments; the impact of
the Russia and Ukraine conflict on the Company’s demand for
products and supply chains; the impact of raw material shortages on
the Company’s Composite Systems segment; the impact of shortages of
premium micro-chips, COVID-19 related lockdowns (including the
institution and re-institution of lockdowns and other public health
restrictions) in China or other geographical locations where the
Company carries on a part of its business, natural gas availability
in Western Europe and other supply chain disruptions on automobile
manufacturers and the impact thereof on the Company’s Automobile
and Industrial segment; the growth in the Company’s order backlog
during the second half of 2022 and the increased execution of work
secured in the backlog during the second half of 2022; the
anticipated increase in drilling and completion related capital
spending in North America and an increase in offshore pipeline
installations and the impact on the Company’s business; the impact
on the Company’s business of the anticipated increase in
infrastructure spending, including in the areas of water
management, communication networks and nuclear refurbishment; and
the impact on the Company’s business of increasing adoption rates
for electric vehicles.
Forward-looking information involves known and
unknown risks and uncertainties that could cause actual results to
differ materially from those predicted by the forward-looking
information. We caution readers not to place undue reliance on
forward-looking information as a number of factors could cause
actual events, results and prospects to differ materially from
those expressed in or implied by the forward-looking information.
Significant risks facing the Company include, but are not limited
to: shortages and delays in the supply of or increases in the
prices of raw materials used by the Company, as well as the impact
of overall cost inflation; changes in underlying economic factors
affecting demand for the Company’s products and services; the
duration and impact of the COVID-19 pandemic and future public
health crises and other events outside the Company’s control on the
Company, its employees, customers, suppliers, energy and commodity
markets and on the global economy; the actual and potential risks
and uncertainties relating to the ultimate geographic spread of
COVID-19, the severity of the disease and the duration of the
COVID-19 pandemic, the issues relating to the resurgence of
COVID-19 and/or new strains of COVID-19, and actions that have been
and may be taken by governmental authorities to contain the
COVID-19 pandemic or to treat its impact and the availability,
effectiveness and use of treatments and vaccines (including the
effectiveness of boosters), including potential material adverse
effects on our business, operations and financial performance; a
decline in the level of North American drilling and completion
activity; a decline in the level of global pipeline construction;
the impact of divestitures and acquisitions on the Company; changes
in competitive conditions within the markets that the Company
operates in; the requirement to comply with various covenants under
the Company’s existing and future debt obligations, the ability to
make the scheduled payments thereunder and the potential for
changes to the Company’s credit rating; rising interest and
inflation rates; fluctuations in foreign exchange rates; exposure
to product, environmental and other liability claims; the impact of
expanding environmental, social and governance practices and
disclosure requirements and changing investor sentiment in respect
thereof; compliance with environmental, trade, health, safety, tax
and other laws in multiple jurisdictions; the impact of activist
shareholders; the impact of climate change on operations, supply
chains and demand for the Company’s products and services;
political, economic, health, global supply chain and other risks
arising from the Company’s international operations including the
Russia and Ukraine conflict; the Company’s ability to continue to
optimize its portfolio and identify and successfully execute on
opportunities for acquisitions and dispositions in alignment with
its strategic plan; changes in trade, tax or other laws in Canada
or internationally; disruptions of informational technology systems
or cybersecurity breaches; as well as other risks and uncertainties
described under "Risks and Uncertainties" in the Company’s annual
MD&A and in the Company’s Annual Information Form under "Risk
Factors".
These statements of forward-looking information
are based on assumptions, estimates and analysis made by management
in light of its experience and perception of trends, current
conditions and expected developments as well as other factors
believed to be reasonable and relevant in the circumstances. These
assumptions include those in respect of the reduction and/or
continuing easing of certain COVID 19 related restrictions
(including that governmental and public health authorities will not
be required to institute or re-institute lockdowns or other public
health restrictions) and the impact thereof on global economic
activity, the Company’s ability to manage supply chain disruptions
caused by the COVID-19 pandemic, other health crises or by natural
disasters, global oil and gas prices, improving pipe coating
activity levels throughout the balance of 2022; sustained strong
demand for the Company’s FRP tanks, including for retail fuel
storage and water treatment and storage; increased demand for
composite pipe; the future easing of microchip shortages in the
automotive sector and increased demand in the automotive and
industrial markets; heightened demand for electric and hybrid
vehicles and for electronic content within those vehicles;
heightened infrastructure spending in Canada, including in respect
of nuclear plant refurbishment and upgraded communication and
transportation networks; the likelihood of projects tied to
securing long-term domestic energy supply or drilling rights being
sanctioned, the recommencement of increased capital expenditures in
the global offshore oil and gas segment replace, maintain and
rehabilitate existing infrastructure, replace production due to
reservoir depletion and to address geopolitical challenges
impacting several producing regions, the continued recovery of the
global economy, a gradual rise of oil and gas markets in North
America, the Company’s ability to execute projects under contract,
the Company’s continuing ability to provide new and enhanced
product offerings to its customers, that the Company will continue
to be able to optimize its portfolio and identify and successfully
execute on opportunities for acquisitions and dispositions in
alignment with its strategic plan, the higher level of investment
in working capital by the Company, the easing of resin shortages
and the continued supply of and stable pricing or the ability to
pass on higher prices to its customers for commodities used by the
Company, the availability of personnel resources sufficient for the
Company to operate its businesses, the maintenance of operations in
major oil and gas producing regions, the adequacy of the Company’s
existing accruals in respect of environmental compliance and in
respect of litigation and tax matters and other claims generally,
the adequacy of the impairment charges taken, and the level of
payments under the Company's performance, bid and surety bonds and
the ability of the Company to satisfy all covenants under its
Credit Facility and other debt obligations and having sufficient
liquidity to fund its obligations and planned initiatives. The
Company believes that the expectations reflected in the
forward-looking information are based on reasonable assumptions in
light of currently available information. However, should one or
more risks materialize, or should any assumptions prove incorrect,
then actual results could vary materially from those expressed or
implied in the forward-looking information included in this
document and the Company can give no assurance that such
expectations will be achieved.
When considering the forward-looking information
in making decisions with respect to the Company, readers should
carefully consider the foregoing factors and other uncertainties
and potential events. The Company does not assume the obligation to
revise or update forward-looking information after the date of this
document or to revise it to reflect the occurrence of future
unanticipated events, except as may be required under applicable
securities laws.
To the extent any forward-looking information in
this document constitutes future oriented financial information or
financial outlooks, within the meaning of securities laws, such
information is being provided to demonstrate the potential of the
Company and readers are cautioned that this information may not be
appropriate for any other purpose. Future oriented financial
information and financial outlooks, as with forward-looking
information generally, are based on the assumptions and subject to
the risks noted above.
5.0 RECONCILIATION OF
NON-GAAP MEASURES
The Company reports on certain non-GAAP measures
that are used to evaluate its performance and segments, as well as
to determine compliance with debt covenants and to manage its
capital structure. These non-GAAP measures do not have standardized
meanings under IFRS and are not necessarily comparable to similar
measures provided by other companies. The Company discloses these
measures because it believes that they provide further information
and assist readers in understanding the results of the Company’s
operations and financial position. These measures should not be
considered in isolation or used in substitution for other measures
of performance prepared in accordance with GAAP. The following is a
reconciliation of the non-GAAP measures reported by the
Company.
EBITDA and Adjusted EBITDA
EBITDA is a non-GAAP measure defined as earnings
before interest, income taxes, depreciation, and amortization.
Adjusted EBITDA is also a non-GAAP measure defined as EBITDA
adjusted for items which do not impact day to day operations.
Adjusted EBITDA is calculated by adding back to EBITDA the sum of
impairments, costs associated with repayment of long-term debt and
credit facilities, gain on sale of land and other, gain on sale of
investment in associates, gain on sale of operating unit,
acquisition costs, restructuring costs and other, net and
hyperinflationary adjustments. The Company believes that EBITDA and
Adjusted EBITDA are useful supplemental measures that provide a
meaningful indication of the Company’s results from principal
business activities prior to the consideration of how these
activities are financed or the tax impacts in various jurisdictions
and for comparing its operating performance with the performance of
other companies that have different financing, capital or tax
structures. The Company presents Adjusted EBITDA as a measure of
EBITDA that excludes the impact of transactions that are outside
the Company’s normal course of business or day to day operations.
Adjusted EBITDA is used by many analysts as one of several
important analytical tools to evaluate financial performance and is
a key metric in business valuations. It is also considered
important by lenders to the Company and is included in the
financial covenants of the Company’s Credit Facility.
|
|
Three Months Ended |
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
June 30, |
|
|
June 30, |
|
|
(in thousands of Canadian dollars) |
|
2022 |
|
|
2021 |
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
$ |
19,947 |
|
$ |
2,592 |
$ |
12,831 |
|
$ |
(13,200 |
) |
|
|
|
|
|
|
|
|
|
|
|
Add: |
|
|
|
|
|
|
|
|
|
Income tax expense |
|
6,199 |
|
|
483 |
|
8,436 |
|
|
3,330 |
|
|
Finance costs, net |
|
6,062 |
|
|
5,765 |
|
10,407 |
|
|
12,798 |
|
| Amortization
of property, plant, equipment, intangible and ROU assets |
|
17,483 |
|
|
19,487 |
|
34,955 |
|
|
39,458 |
|
|
EBITDA |
$ |
49,691 |
|
$ |
28,327 |
$ |
66,629 |
|
$ |
42,386 |
|
|
|
|
|
|
|
|
|
|
|
| Gain on sale
of land and other |
|
(43,017 |
) |
|
– |
|
(43,017 |
) |
|
– |
|
|
Hyperinflation adjustment for Argentina |
|
1,533 |
|
|
1,678 |
|
3,423 |
|
|
2,790 |
|
|
Impairment |
|
20,269 |
|
|
– |
|
20,269 |
|
|
– |
|
|
Restructuring costs, net |
|
2,996 |
|
|
5,201 |
|
4,202 |
|
|
8,596 |
|
|
Adjusted EBITDA(a) |
$ |
31,472 |
|
$ |
35,206 |
$ |
51,506 |
|
$ |
53,772 |
|
| (a) Adjusted EBITDA includes COVID-19 related government wage
subsidies of $3.1 million in the second quarter of 2021, and $5.4
million in the first half of 2021. |
Composite Systems Segment
|
|
Three Months Ended |
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
June 30, |
|
|
June 30, |
|
(in thousands of Canadian dollars) |
|
2022 |
|
|
2021 |
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
$ |
9,521 |
|
$ |
8,151 |
$ |
16,395 |
|
$ |
8,818 |
|
|
|
|
|
|
|
|
|
|
|
Add: |
|
|
|
|
|
|
|
|
| Amortization
of property, plant, equipment, intangible and ROU assets |
|
7,910 |
|
|
7,699 |
|
15,319 |
|
|
15,555 |
|
EBITDA |
$ |
17,431 |
|
$ |
15,850 |
$ |
31,714 |
|
$ |
24,373 |
|
Gain on sale of Land |
|
(3,820 |
) |
|
– |
|
(3,820 |
) |
|
– |
|
Impairment |
|
7,293 |
|
|
– |
|
7,293 |
|
|
– |
|
Restructuring costs, net |
|
1,967 |
|
|
– |
|
2,390 |
|
|
24 |
|
Adjusted EBITDA(a) |
$ |
22,871 |
|
$ |
15,850 |
$ |
37,577 |
|
$ |
24,397 |
| (a) Adjusted EBITDA includes COVID-19 related government wage
subsidies of $1.6 million in the second quarter of 2021, and $3.0
million in the first half of 2021. |
Automotive and Industrial Segment
|
|
Three Months Ended |
Six Months Ended |
|
|
|
June 30, |
|
June 30, |
|
June 30, |
|
June 30, |
|
(in thousands of Canadian dollars) |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
$ |
14,832 |
$ |
9,519 |
$ |
29,719 |
$ |
20,955 |
|
|
|
|
|
|
|
|
|
|
|
Add: |
|
|
|
|
|
|
|
|
| Amortization
of property, plant, equipment, intangible and ROU assets |
|
1,059 |
|
1,101 |
|
2,144 |
|
2,211 |
|
EBITDA |
$ |
15,891 |
$ |
10,620 |
$ |
31,863 |
$ |
23,166 |
|
Restructuring costs, net |
|
54 |
|
46 |
|
81 |
|
78 |
|
Adjusted EBITDA(a) |
$ |
15,945 |
$ |
10,666 |
$ |
31,944 |
$ |
23,244 |
| (a) Adjusted EBITDA includes COVID-19 related government wage
subsidies of $0.5 million in the second quarter of 2021, and $1.0
million in the first half of 2021. |
Pipeline and Pipe Services Segment
|
|
Three Months Ended |
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
June 30, |
|
|
(in thousands of Canadian dollars) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating Loss |
$ |
(22,494 |
) |
$ |
(2,202 |
) |
$ |
(38,674 |
) |
$ |
(11,701 |
) |
|
|
|
|
|
|
|
|
|
|
|
Add: |
|
|
|
|
|
|
|
|
| Amortization
of property, plant, equipment, intangible and ROU assets |
|
8,143 |
|
|
10,082 |
|
|
16,743 |
|
|
20,439 |
|
|
EBITDA |
$ |
(14,351 |
) |
$ |
7,880 |
|
$ |
(21,931 |
) |
$ |
8,738 |
|
|
Hyperinflation adjustment for Argentina |
|
1 |
|
|
111 |
|
|
(1 |
) |
|
28 |
|
|
Impairment |
|
12,976 |
|
|
– |
|
|
12,976 |
|
|
– |
|
| Restructuring
costs, net |
|
576 |
|
|
5,003 |
|
|
707 |
|
|
8,274 |
|
|
Adjusted EBITDA(a) |
$ |
(799 |
) |
$ |
12,994 |
|
$ |
(8,249 |
) |
$ |
17,040 |
|
| (a) Adjusted EBITDA includes COVID-19 related government wage
subsidies of $0.6 million in the second quarter of 2021, and $0.9
million in the first half of 2021. |
Net debt-to-Adjusted EBITDA
Net debt-to-Adjusted EBITDA is a non-GAAP
measure defined as the sum of long-term debt, current lease
liabilities and long-term lease liabilities, less cash and cash
equivalents, divided by Adjusted EBITDA, as defined above, for the
trailing twelve-month period. The Company believes Net
debt-to-Adjusted EBITDA is a useful supplementary measure to assess
the borrowing capacity of the Company. Net debt-to-Adjusted EBITDA
is used by many analysts as one of several important analytical
tools to evaluate how long a company would need to operate at its
current level to pay of all its debt. It is also considered
important by credit rating agencies to determine the probability of
a company defaulting on its debt.
|
|
|
June 30, |
|
|
December 31, |
|
|
(in thousands of Canadian dollars, except Net debt-to-EBITDA
ratio) |
|
2022 |
|
|
2021 |
|
|
Long-term debt |
$ |
278,893 |
|
$ |
292,140 |
|
|
Lease liabilities |
|
44,047 |
|
|
54,439 |
|
|
Cash and cash equivalents |
|
(115,835 |
) |
|
(124,449 |
) |
|
Total Net Debt |
$ |
207,105 |
|
$ |
222,130 |
|
|
|
|
|
|
|
|
Q1 2021 Adjusted EBITDA |
$ |
– |
|
$ |
18,566 |
|
|
Q2 2021 Adjusted EBITDA |
|
– |
|
|
35,206 |
|
|
Q3 2021 Adjusted EBITDA |
|
31,793 |
|
|
31,793 |
|
|
Q4 2021 Adjusted EBITDA |
|
20,078 |
|
|
20,078 |
|
|
Q1 2022 Adjusted EBITDA |
|
20,034 |
|
|
– |
|
|
Q2 2022 Adjusted EBITDA |
|
31,472 |
|
|
– |
|
|
Trailing twelve-month Adjusted EBITDA |
$ |
103,377 |
|
$ |
105,643 |
|
|
|
|
|
|
|
|
Total Net debt-to-Adjusted EBITDA |
$ |
2.00 |
|
$ |
2.10 |
|
ShawCor (TSX:SCL)
過去 株価チャート
から 11 2024 まで 12 2024
ShawCor (TSX:SCL)
過去 株価チャート
から 12 2023 まで 12 2024
