H2O Innovation reports 2010 second quarter results – Sales of $7.1 million, results impacted by recession, Company stays focused on growth strategy
- Sales of $7.1 million, down from $9.5 million for the same period in fiscal 2009.
- Gross margin at 22.1%, compared to 25.6% for the same period in fiscal 2009.
- Operating loss of ($1,121,597), compared to operating earnings of $303,283 for the same period in fiscal 2009.
- EBITDA at ($982,738) compared to $1,206,766 for the same period in fiscal 2009 (including the effects of a mostly unrealized foreign exchange loss).
- Net loss of ($1,576,222), compared to net income of $727,148 for the same period in fiscal 2009 (including the effects of a mostly unrealized foreign exchange loss).
- Operating activities used ($1,013,823) in cash, compared to $1,209,946 in cash generated for the same period in fiscal 2009.
All amounts in Canadian dollars unless otherwise stated.
Quebec City, February 10, 2010 – H2O Innovation Inc. (“H2O Innovation” or the “Company”), a complete water treatment solutions company providing custom designed water treatment systems along with operating and maintenance solutions, announces today its results for the second quarter of fiscal year 2010. During the quarter, H2O Innovation's results felt the impact of the enduring recession, with sales and EBITDA decreasing compared to the corresponding quarter of the previous fiscal year. The results of the quarter ended December 31, 2009 also show an increase in the level of revenues derived from the sale of services and consumable products, and show the proportion of revenues coming from sales recorded outside North America to be comparable to the level of previous quarter of fiscal 2010. Over the course of the quarter and shortly after, the Company took significant and constructive actions to increase the level of its revenues derived from industrial sales as well as its international revenues by entering into a sales representation agreement in the United States with 3M Purification Inc. and by creating H2O Innovation India Ltd., a joint venture with Chembond Chemicals Limited of Mumbai, India to serve the industrial, commercial, and institutional water treatment markets in India.
For the three-month period ended December 31, 2009, sales amounted to $7,087,242 compared to $9,546,009 for the same three-month period ended December 31, 2008. The decrease in sales caused a decrease of the Company's gross margin from $2,441,668 to $1,568,895 for the three months ending December 31, 2008 and 2009. This decrease in gross margin for the quarter compared to the same quarter last year resulted from multiple factors, but primarily by the unusually high proportion of income derived from municipal projects compared to income from industrial projects. However, sales of consumables contributed to somewhat mitigating this effect. In percentage, gross margin for the quarter amounted to 22.1%, compared to 25.6% for the corresponding quarter of the previous fiscal year. Operating loss for the quarter was ($1,121,597), compared to operating earnings of $303,283 for the same period of the previous fiscal year. EBITDA for the quarter was ($982,738), compared to $1,206,766 for the same period ended December 31, 2008. Excluding unrealized foreign exchange loss, EBITDA for the quarter was ($778,108). During the quarter, H2O Innovation recorded a net loss of ($1,576,222) ($0.029 per share), compared to net earnings of $727,148 ($0.015 per share) for the corresponding quarter of the previous fiscal year. This nominal decrease of $2,303,370 is explained by various factors, including the exchange loss on financial assets and liabilities in U.S. dollars, the nominal decrease in sales and a non-recurring loss of ($138,634) on the disposal of assets.
The Company's sales backlog stood at $19.2 M as at December 31, 2009 and at $10.8 M as at February 8, 2010. The nominal reduction of the Company's backlog between December 31, 2009 and February 8, 2010 can in large part be attributed to the definitive cancellation of a contract, as announced by press release on February 8, 2010. The Company's sales backlog is comprised entirely of systems and equipment sales and does not include sales of services or consumable products.
Before the change in operating working capital, operating activities used $1,013,823 in cash for the period ended December 31, 2009 compared to $1,209,946 in cash generated for the comparable period ended December 31, 2008.
“During this quarter, we felt the full impact of the recession that began almost a year and a half ago. U.S. and Canadian industrial companies remained cautious and, for most of them, continued to delay investments in capital equipment such as water treatment systems. This is why during the quarter and shortly after, constructive actions were taken in a timely manner to increase our growth opportunities, with a particular focus on increasing our industrial and international sales. Although the results of the quarter do not satisfy us, we are confident that the actions undertaken during the quarter and the developments announced shortly thereafter will place H2O Innovation in a better position to continue its growth as a leading provider of high performance water treatment solutions not only in North America, but also increasingly on an international level”, stated Frédéric Dugré, President and CEO of H2O Innovation Inc.
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