DRUMMONDVILLE, QC, Nov. 14 /CNW Telbec/ - CVTech Group Inc. ("CVTech") (TSX: CVT) announced an increase in its revenues and net profits, as well as a strong cash position, at the end of the third quarter 2006.
CVTech Group is a management company with subsidiaries that design, manufacture and sell continuously variable power transmission parts ("CVT"). Another subsidiary, Thiro Ltd. ("Thiro"), provides turnkey service for building and maintaining power transmission and distribution lines. The Company's subsidiary Atelier Adrien Bernard Inc. ("AAB") specializes in rebuilding industrial cylinders and crankshafts. CVTech also has two indirect subsidiaries: Thiro USA Inc. and J.J.L. Déboisement Inc.
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Following are the financial highlights for the three-month period ended
September 30, 2006:
- At the end of this quarter, the Company showed net profits of $201,399
versus an amount of $11,072 for the same period in 2005.
- Consolidated revenues increased substantially, from $7,255,228 for the
third quarter of 2005 to $22,226,025 for the same period in 2006.
- EBITDA for the 3rd quarter stood at $1,816,035 (8.2% of revenues)
compared to $497,853 (6.9% of revenues) for the three-month period
ended September 30, 2005.
Financial Expenses
Financial expenses in the third quarter of this year were up $196,626 over
the same period in 2005. This increase reflects financial expenses incurred by
Thiro in the amount of $134,231. Since CVTech's debts - both short- and
long-term - have been negotiated at variable interest rates, financial
expenses are affected by interest rate fluctuations. Consequently, the rise in
the average prime rate during the third quarter of 2006 versus Q3 2005 had a
negative impact on financial expenses. This rise is also due to increased use
of bank credit and additional interest paid after a term loan of $4,500,000
had been secured for the Thiro acquisition.
In August 2006, CVTech negotiated financing in the form of three
convertible debentures of a total face value of $15,000,000, of which
$9,000,000 was used to fund the AAB acquisition. Interest charges for this new
debt totalled $47,466, which was recorded in the financial statements for the
three-month period ended September 30, 2006.
Revenue for the quarter and the first nine months, by sector of activity
The following tables show quarterly revenues as at September 30, 2006, by
sector of activity.
Three-month periods ended September 30,
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2006 2005 Variation
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$ % $ % $ %
CVT 5,824,603 26.2% 7,255,228 100.0% (1,430,625) -19.7%
Electricity
and pruning 16,401,422 73.8% - - 16,401,422 -
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Total 22,226,025 100.0% 7,255,228 100.0% 14,970,797 206.3%
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Nine-month periods ended September 30,
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2006 2005 Variation
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$ % $ % $ %
CVT 15,137,094 24.7% 16,557,189 100.0% (1,420,095) -8.6%
Electricity
and pruning 46,104,579 75.3% - - 46,104,579 -
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Total 61,241,673 100.0% 16,557,189 100.0% 44,684,484 269.8%
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Selected Quarterly Financial Data (unaudited)
The following table summarizes certain items of the Company's financial
information, presented on a consolidated basis. They should be read in
conjunction with the financial statements and relevant notes posted on SEDAR.
Three-month period Nine-month period
ended September 30, ended September 30,
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2006 2005 2006 2005
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$ $ $ $
Revenue 22,226,025 7,255,228 61,241,673 16,557,189
EBITDA 1,816,035 497,853 4,678,149 406,823
Net profit (loss) 201,399 11,072 468,715 (819,706)
Basic earnings (losses)
per share - - 0.01 (0.02)
Basic diluted earnings
(losses) per share - - 0.01 (0.02)
Basic weighted-average
number of shares
outstanding 49,837,939 39,365,203 49,553,526 35,028,646
Diluted weighted-average
number of shares
outstanding 52,063,133 42,240,947 51,840,038 35,028,646
Shares outstanding
as at September 30 50,666,102 39,601,925 50,666,102 39,601,925
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Following are the financial highlights for the nine-month period ended
September 30, 2006:
- Consolidated net income for the nine-month period ended September 30,
2006 increased to $468,715 ($0.01 per share) from a loss of $819,706
for the same period in 2005 (a loss of $0.02 per share).
- Consolidated revenues rose from $16,557,189 for the nine-month period
ended September 30, 2005 to $61,241,673 for the same period in 2006.
- EBITDA stood at $4,678,149 (7.6% of revenue) versus $406,823 (2.5% of
revenue) for the nine-month period ended September 30, 2005.
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Developments occurring in the quarter ended September 30, 2006
AAB Acquisition
On September 8, 2006, the Company acquired all issued and outstanding shares in AAB for a total consideration of $9,050,697. This transaction was recorded by acquisition method and the results were consolidated starting September 1st, 2006, the date on which the Company took control of AAB's business activities.
This acquisition is in line with the corporate strategy developed by CVTech. As is the case with all companies belonging to CVTech, AAB has developed expertise that is recognized both in Canada and abroad, and shows strong growth potential.
The Company intends to capitalize on its presence in the U.S., Europe and
Asia to promote the products and services offered by AAB, thereby maximizing its growth.
Arbitration
Following a mediation session that was held on August 22, 2006 between CVTech and Bombardier Recreational Products Inc. ("BRP"), the Company received $387,526 from BRP in settlement of their dispute. The amount of $375,000 had been recorded in the CVTech's financial statements for the fiscal year ended December 31, 2005. The difference was included in the financial statements for the three-month period ended September 30, 2006.
Establishing a Presence in India
The Company is pursuing its development efforts jointly with Indian auto manufacturer Tata Motors Ltd., with a view to providing them with CVTs for their small vehicle production. On August 8, 2006, CVTech signed a shareholders' agreement with its Indian partner, Ruchika Engineering Private Ltd. Under the terms of this partnership, CVTech owns a 74% share in the new company, which has been incorporated in India under the name CVTech Castmaster India PVT Ltd. On September 4, 2006, CVTech hired a general manager for this new subsidiary, who works full-time out of our New Delhi facility. The next steps in the process include primarily buying land and building a plant in which it will be able to begin manufacturing CVTs by mid-2008. Expenses incurred to date for the Indian undertaking have been capitalized under deferred charges.
The GLR-Thiro, s.e.n.c. Consortium
On August 31, 2006, Thiro entered into a partnership with GLR Inc. ("GLR") to build a 161-Kv line on freestanding steel transmission poles between the Péribonka and Simard substations, and to incorporate the new line into the Saguenay network. The contract will run from mid-October 2006 to August 2007, and is expected to produce approximately $35,000,000 for the GLR-Thiro, s.e.n.c. consortium, in which Thiro is a 50% shareholder. GLR is a general contractor involved in the construction of power transmission lines and other sectors.
FORWARD-LOOKING STATEMENTS
The statements made in this press release, which describe CVTech's objectives, projections, estimates, expectations or predictions, may constitute forward-looking statements within the meaning of the securities laws applicable to CVTech. Such statements characteristically use the negative or affirmative forms of verbs such as "anticipate", "evaluate", "estimate" and "believe", as well as other similar expressions. CVTech cautions that, by their very nature, forward-looking statements involve risk and uncertainty, and that its results or the measures that it takes might differ considerably from those expressed or implied in such forward-looking statements, or could affect the extent to which a particular projection is realized. The major factors that could lead to a considerable difference between the actual results obtained by CVTech and the projections or expectations put forward in the statements include the effect of integrating acquired businesses and the ability to achieve the expected synergies, competition, changes in interest rates, the risks associated with suppliers of services, changes in tax regulations and in accounting standards, the success of CVTech's business model, changes in foreign exchange rates, and other risks described in detail from time to time in reports filed by CVTech with Canadian securities administrators. Unless so required by the applicable securities Acts, CVTech denies any intention and undertakes no obligation to update or to revise any forward-looking statements, whether because of new information or of future events, or for any other reason whatsoever. In conclusion, the forward-looking information contained in the present document is based on the information available on the date of its publication.
The present Press Release also includes certain financial measures that are not described under generally accepted accounting principles. These measures are reconciled with the most comparable and most recent financial measures, as described in the "Additional Information" section of CVTech's consolidated financial statements.
The contents of the present Press Release have not been approved by or
submitted to TSX and consequently TSX assumes no responsibility for the
present Release.
For more detailed information concerning CVTech, please consult the SEDAR database at: www.sedar.com of the Company Website at: www.cvtech-ibc.com.
For further information: André Laramée, MBA, President and CEO, CVTech Group Inc., (819) 477-3232; Clément C. Gagnon, MBA, President, CGE Communication Group, (514) 987-1455; Mario Trahan, CMA, Chief Financial Officer, CVTech Group Inc., (819) 477-3232
