Bri-Chem Corp. ("Bri-Chem" or "Company") (TSX:BRY), a leading North American
wholesale distributor and manufacturer of oil and gas drilling fluids and steel
pipe is pleased to announce its financial results for the third quarter ended
September 30, 2013.
During the third quarter of 2013, Bri-Chem's consolidated quarterly revenues
increased 40.1% to $51,730,842 compared to $36,915,533 from the comparable prior
period in 2012. This year-over-year increase is primarily a result of organic
sales growth from Bri-Chem's North American drilling fluids distribution and
blending divisions which recorded combined sales of $43,286,604 for the three
months ended September 30, 2013 compared to sales of $27,914,492 in the
comparable quarter in 2012, representing an increase of 55% quarter over
quarter. In addition, Bri-Chem continued to make strong progress in growing
quarter over quarter sales in its steel pipe manufacturing division having
realized a 22% increase. Overall consolidated gross margin increased to 16.9%
due to management's ongoing geographic and product diversification strategy,
targeting increased profitability.
Consolidated revenues for the nine months ended September 30, 2013 were
$129,669,861 compared to $120,553,084 for the comparable period of 2012, an
increase of 7.6%. Adjusted earnings before interest, taxes, amortization and
share-based payments expense ("Adjusted EBITDAC") was $3,672,060 or $0.21 per
share and $8,544,940 or $0.49 per share respectively for the three and nine
month periods ended September 30, 2013, compared to $2,963,886 and $8,445,973
respectively for the same periods in 2012. Net earnings for the three month
period were $1,077,982 or $0.07 diluted earnings per share and $1,868,872 or
$0.13 diluted earnings per share for the nine months ended September 30, 2013 as
compared to net earnings of $1,438,579 and $3,562,379 respectively for the same
periods in 2012. Net earnings decreased for the three and nine month periods
ended September 30, 2013 mainly due to three significant non-cash related items
being amortization increasing by $391,994 as more assets were put into use over
the last year, a $579,826 increase in stock-based compensation and foreign
exchange as the US dollar rose in comparison to the Canadian dollar, resulting
in a $873,051 foreign exchange difference. In addition, the Company incurred
$624,664 of additional interest expense related to a new subordinated debt
facility acquired in late 2012. As of September 30, 2013, the Company's net book
value per share was $2.36.
Bri-Chem's North American oil and gas drilling fluids distribution and blending
divisions recorded sales of $43,286,604 and $105,103,587 respectively for the
three and nine month periods ended September 30, 2013, an increase of 55.1% and
17.7% over the same comparable periods in 2012. On September 6, 2013, the
Company acquired assets and business operations of Sun Coast Materials, a
California, USA based specialty cement chemical blending and packaging company,
that is expected to further expand Bri-Chem's product offerings into the USA
market and provides a solid growth platform to offer cementing products and
blending services throughout the USA market.
In Canada, drilling rig utilization averaged 41.3% for the third quarter, which
was consistent compared to the same quarter in 2012 when utilization rates
averaged 41.0%, and the number of active operating rigs were also comparable,
quarter over quarter, at 338 rigs. Despite the nominal year over year change in
Q3 drilling activity, the Canadian drilling fluids distribution division
generated sales of $24,126,287 and $61,443,414 for the three and nine months
ended September 30, 2013, compared to sales of $18,918,970 and $67,591,020 for
the comparable periods in 2012. The 27.5% increase in Q3 Canadian fluid sales is
due to the return of increased demand in Northern British Columbia, which
resulted in Bri-Chem experiencing a 50.2% increase in liquid invert sales during
the third quarter compared to the third quarter of 2012, along with Bri-Chem's
customers increasing work in certain regions such as Lloydminster and Rosetown,
Saskatchewan. The extensive weather and flooding in Western Canada that occurred
during the spring, delayed the start to the summer drilling programs, which
resulted in increased demand and sales into the third quarter.
The USA drilling fluids distribution division is growing at an extraordinary
pace as a result of our extensive market outreach to new customers in numerous
geographic regions throughout the USA. For the three and nine month periods
ended September 30, 2013, the division experienced sales of $12,643,406 and
$30,709,816, an increase of 122% and 112% respectively over the same periods in
2012. With sixteen warehouses operating in all the major resource plays in the
USA, the division will focus on continuing to grow its overall market share.
The Canadian fluids blending and packaging division continues to significantly
expand as the Company generated sales of $6,068,099 and $12,501,545 compared to
prior year sales of $3,287,218 and $7,208,769 representing an 85% and 73%
increase respectively for the three and nine months ended September 30, 2013.
The division has realized increased sales as a result of penetrating new
customers by providing cementing products into new geographic regions throughout
North America and adding additional blending and storage capacity at its Acheson
facility. In addition, the recent acquisition of Sun Coast Materials, the USA
fluids blending and packaging division, generated new sales of $448,812 for the
three weeks of operations during the third quarter.
The steel pipe distribution division recorded sales of $3,457,866 and
$10,755,477 respectively for the three and nine month periods ended September
30, 2013, compared to revenues of $4,645,226 and $21,871,408 for the same
periods in 2012. Since the fourth quarter of 2012, the Canadian market has
experienced excess steel pipe inventory as many distributors were anticipating a
stronger demand for steel pipe product during the 2013 winter drilling season.
In addition, sales in the second quarter of 2012 included a substantial one-time
mill direct order of approximately $5.1 million. The steel pipe distribution
division will concentrate on replacing certain inventory with higher demand
sizes that will increase inventory turns while maintaining superior customer
service, with the appropriate quantities and sizes of steel pipe to meet the
demand of its customers.
The steel pipe manufacturing division recorded sales of $4,949,451 and
$13,773,876 respectively for the three and nine month periods ended September
30, 2013, an increase of 22% and 59% over the prior comparable periods. With the
many major pipeline projects being delayed, the division has not experienced the
robust demand for its large diameter seamless pipe. Despite the weaker demand,
the division has been actively quoting for various jobs and is diligently
working with a number of major energy companies that would place Bri-Chem on
approved manufacturer's lists. As the market works through inventories and
capital projects commence, the division is cautiously optimistic that 2014 will
see increased demand which will drive increased sales and earnings growth.
Outlook Summary
The Petroleum Services Association of Canada (PSAC) has forecasted 2,908 wells
to be drilled in Western Canada for the fourth quarter of 2013, a forecasted
increase of 6.2% over 2012. Spring break up was longer than anticipated due to
the unusually wet spring which delayed many summer drilling programs to Q3 2013.
The Company anticipates drilling activity will remain strong for the remainder
of the year and into the winter drilling programs in 2014. A return to drilling
in Northern British Columbia will also assist in the demand for drilling fluid
products and will drive Canadian fluid sales. Bri-Chem will continue to invest
into its USA drilling fluid market expansion plan with the goal of obtaining
significant market share. As we continue to gain market share in the USA
drilling fluids market, more product and acquisition opportunities become
available and the Company will continue to pursue its market presence in the
USA. With the recent acquisition of Sun Coast, Bri-Chem has now established a
platform for fluids blending and packaging in the USA market place and will look
to grow its market presence by distributing its blending products and services
into other regions in the USA where we currently operate. We will also continue
to closely monitor North American steel pipe demand and seek to increase
production capacity at the Thermal Pipe Expansion manufacturing facility when
demand returns to more normal levels.
About Bri-Chem
Since our formation in 1985, Bri-Chem has established two primary segments of
business through a combination of internal growth and acquisitions: Bri-Chem's
Drilling Fluid Division is North America's largest independent wholesale
supplier of drilling fluids for the oil and gas industry. We provide over 100
drilling fluid products, cementing, acidizing and stimulation additives from 31
strategically located warehouses throughout Canada and the United States;
Bri-Chem's Steel Pipe Division is the first company to introduce and construct a
Thermal Pipe Expansion (TPE) facility in North America for manufacturing,
testing and supply of large diameter seamless steel pipe for the energy
industry. Additional information about Bri-Chem is available at www.sedar.com or
at Bri-Chem's website at www.brichem.com.
Forward-Looking Statements
Certain information set forth in this news release contains forward-looking
statements or information ("forward-looking statements"), including statements
which may contain words such as "could", "should", "expect", "anticipate",
"believe", "will", and similar expressions and statements relating to matters
that are not historical facts are forward looking statements. By their nature,
forward-looking statements are subject to numerous risks and uncertainties, some
of which are beyond the Company's control, including the impact of general
economic conditions, industry conditions, volatility of commodity prices,
currency fluctuations, environmental risks, demand for oilfield services for
drilling and completion of oil and natural gas wells; volatility in market
prices for steel, oil, natural gas, and natural gas liquids and the effect of
this volatility on the demand for oilfield services generally, competition from
other industry participants, the lack of availability of qualified personnel or
management, stock market volatility and the ability to access sufficient capital
from internal and external sources. Although the Company believes that the
expectations in our forward-looking statements are reasonable, our
forward-looking statements have been based on factors and assumptions concerning
future events which may prove to be inaccurate. Those factors and assumptions
are based upon currently available information. Such statements are subject to
known and unknown risks, uncertainties and other factors that could influence
actual results or events and cause actual results or events to differ materially
from those stated, anticipated or implied in the forward looking information. As
such, readers are cautioned not to place undue reliance on the forward looking
information, as no assurance can be provided as to future results, levels of
activity or achievements. The risks, uncertainties, material assumptions and
other factors that could affect actual results are discussed in our Annual
Information Form and other documents available at www.sedar.com. Furthermore,
the forward-looking statements contained in this document are made as of the
date of this document and, except as required by applicable law, the Company
does not undertake any obligation to publicly update or to revise any of the
included forward-looking statements, whether as a result of new information,
future events or otherwise. The forward-looking statements contained in this
document are expressly qualified by this cautionary statement.
To receive Bri-Chem news updates send your email to ir@brichem.com.
Neither the TSX nor its Regulation Services Provider (as that term is defined in
the policies of the TSX) accepts responsibility for the adequacy or accuracy of
this release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Bri-Chem Corp.
Jason Theiss
CFO
(780) 577-0595
jtheiss@brichem.com
CHF Investor Relations
Robin Cook
Account Manager
(416) 868-1079
juliet@chfir.com
CHF Investor Relations
Cathy Hume
CEO
(416) 868-1079 x231
cathy@chfir.com
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