TORONTO, Aug. 10, 2021 (GLOBE NEWSWIRE) -- Shawcor Ltd. (“Shawcor” or the “Company”) (TSX: SCL) reported today its operational and financial results for the three months ended June 30, 2021. 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 months ended June 30, 2021, which are available on the Company’s website and at www.sedar.com.

• Second quarter 2021 revenue was $306 million, 15% higher than the $266 million reported in the second quarter of 2020.
• Adjusted EBITDA¹ in the second quarter of 2021 was $35.2 million, reflecting $3.1 million of COVID-19 related government wage subsidies, 719% higher than the $4.3 million of Adjusted EBITDA reported in the second quarter of 2020, which included $7.5 million of COVID-19 related government wage subsidies.
• Net Income² in the second quarter of 2021 was $2.6 million (or income per share of $0.04 diluted) compared with a net loss of $36.9 million (or $0.52 loss per share diluted) in the second quarter of 2020. Adjusted net income^1,2 in the second quarter of 2021 was $10.8 million (or adjusted income per share^1,2 of $0.15) compared with adjusted net loss^1,2 of $21.9 million (or $0.31 adjusted loss per share^1,2) in the second quarter of 2020.
• The Company’s order backlog was $489 million at June 30, 2021, compared to the backlog of $521 million at March 31, 2021.

Mr. Mike Reeves, President & Chief Executive Officer of Shawcor Ltd. remarked “During the second quarter Shawcor delivered Adjusted EBITDA of $35.2 million on $305.9 million of revenue. Strong performance in all business segments was driven by sequentially higher pipeline coating margins, improved demand for composite pipe and robust order intake across Shawcor’s non-oil and gas product portfolio.”

Mr. Reeves added “While Shawcor, like many of our peers, continues to experience raw material supply chain tightness, supportive fundamentals in the majority of our diverse end markets coupled with Shawcor’s substantial backlog, commitment to technical innovation and disciplined cost management position the Company to deliver positive financial results for the remainder of 2021 and beyond while keeping our employees healthy and safe.”

¹ EBITDA, Adjusted EBITDA, adjusted net income or loss and adjusted earnings or loss per share 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 Net Income (Loss) attributable to shareholders of the Company.

Selected Financial Highlights



1.0      SECOND QUARTER HIGHLIGHTS

Adjusted EBITDA¹ of $35.2 million in the second quarter reflects higher profitability from the execution of pipe coating activity and increased demand for composite pipe products in the upstream oil and gas market. In addition, the second quarter benefited from continued growth in the Company’s non-oil and gas businesses which accounted for almost 40% of the revenue in the quarter. The second quarter results also include $3.1 million of COVID-19 related government wage subsidies.

Since March of 2020, the Company has actioned the closure of several girth weld inspection branches and controlled shutdown or sale of 9 fixed pipe coating facilities, including the current quarter’s decision to proceed with the closure plans for its Adria, Italy facility and completed sale of one of its facilities in Argentina. The Company incurred $5.2 million of one-time net restructuring charges in the quarter and continues to expect a quarterly normalized SG&A run-rate of approximately $55 million for the remainder of the year.

As at June 30, 2021, the Company had cash and cash equivalents totaling $140.0 million (December 31, 2020 – $214.5 million). This decrease is due to the repayment of $75 million on its outstanding credit facility in the second quarter of 2021, which was completed based on confidence in the outlook for the year. Partially offsetting the decrease, the quarter generated positive cash flow from operations of $24.7 million, reflecting improved operating results and a reduction of $6.3 million in working capital excluding the impact of restructuring liabilities, and limited capital spending to $5.0 million during the second quarter.

Selected Segment Financial Highlight

The Pipeline and Pipe Services segment delivered improved performance across all businesses in the quarter compared to the first quarter of 2021. Despite some supply chain challenges, the Company successfully executed on increased large pipe coating project backlog during the current quarter. The segment’s engineering services business experienced muted activity levels coming off its first quarter seasonal slowdown, while the integrity management business contributed stable revenue in the quarter. The Pipeline and Pipe Services segment generated revenues of $142.6 million, a decrease of $13.7 million, or 9%, from $156.3 million in the second quarter of 2020. This was primarily due to the absence of $22.5 million of revenue attributable to the Products business that was sold in late 2020. Adjusted EBITDA¹ in the second quarter of 2021 was $13.0 million, a significant improvement compared to a negative $3.1 million in the second quarter of 2020, reflecting higher margin pipe coating activity and reduced operating cost base.

The Composite Systems segment experienced increased revenues for retail fuel and water/wastewater fiberglass reinforced plastic (“FRP”) tanks following the previous quarter’s seasonal slowdown, however, production levels were impacted by raw material shortages. Improved drilling and completion activity in the Permian Basin and Western Canada in the current period drove increases in this segment’s composite pipe product sales and tubular management services. Revenue in the second quarter of 2021 increased by $29.7 million, or 44%, compared to the second quarter of 2020. Adjusted EBITDA¹ in the second quarter of 2021 was $15.9 million compared to $7.7 million in the second quarter of 2020.

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 Automotive and Industrial segment continued its strong performance, though not at the record-levels of profitability experienced in the previous quarter. The segment delivered revenues of $66.7 million in the second quarter of 2021, a 54% increase over the same period of 2020. Adjusted EBITDA¹ of $10.7 million in the second quarter of 2021 also represented an increase compared to $5.3 million in the second quarter of 2020. Demand for the Company’s automotive products continued to outpace automotive production recovery as a result of increased adoption of electronic content and inventory build. In industrial markets, the business benefitted from infrastructure spending to build out communication and transportation networks. The segment’s revenue also benefitted from early pass through of copper price increases in the quarter, albeit with no impact on gross margin.

The order backlog of $489 million as at June 30, 2021, represents a decrease over the $521 million order backlog as at March 31, 2021. This expected decrease was mainly attributed to steady execution on pipe coating projects, partially offset by intake in the Company’s FRP tank business and an increase in orders in other areas of the Company’s business. Outstanding firm bids were over $972 million as of June 30, 2021, higher than the $811 million from last quarter due to increased bidding activity. Conditional bids, pending final investment decision, were at $151 million in revenue at the end of the quarter, an increase over $110 million compared to the prior quarter. Budgetary estimates at the end of the second quarter were over $1 billion, on par with the budgetary value of $1 billion as at the end of the previous quarter.

2.0      OUTLOOK

The Company expects to deliver improved financial performance in 2021 over 2020, with improved performance in the second half of the year and some quarterly volatility due to project execution timing. Although disruptions related to supply chain issues are expected to continue for the remainder of the year, the Company anticipates these impacts will largely have abated by early 2022.

As discussed earlier, the Company expects its quarterly normalized SG&A run-rate to be approximately $55 million. The Company has substantially rationalized its footprint and will continue to focus on maintaining efficient operations with the technical expertise and geographic footprint that provide the best opportunity for the Company to secure work and drive profitability.

The Company anticipates some modest delays in final investment decisions and contract award decisions tied to several larger pipe coating projects, pushing associated backlog build into early 2022 rather than late 2021 as originally expected. However, in most cases the execution schedules for these projects are not expected to be materially delayed.

Pipeline and Pipe Services Segment

The Company expects to continue to execute work secured in its backlog with several projects nearing completion in the second half of the year. Larger operators have maintained their disciplined approach to capital spending and a modest improvement in spending is expected to continue throughout 2021 as operators return to a minimum base level of investment to maintain current levels of production. A moderate increase in drilling and completion related capital spending is expected as activity levels in the Permian Basin and in Western Canada grow.

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.

Composite Systems Segment

Demand for FRP tanks is expected to remain robust throughout 2021 as retail fuel service stations maintain healthy margins. Continued growth in demand for water storage and treatment FRP tanks is expected to be supported by projected higher infrastructure spending and commercial and municipal water projects. Raw material shortages and associated supply chain challenges are anticipated to persist for the remainder of the year. 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. Modest improvements in demand for the segment’s core pipe products and tubular management services in North America are expected as activity levels in Western Canada and in the Permian Basin continue their gradual rise.

Automotive and Industrial Segment

The Company’s automotive facility in Germany experienced some damage and downtime as a result of the recent flooding in the region; however, rapid cleanup and repair activities have been completed and the site has returned to near fully operational status. Given the speed of this recovery, the Company does not anticipate material impacts to its performance in the second half of the year and orders can be fulfilled by facility locations in other regions if needed. In spite of this event and the challenges associated with sustained raw material shortages, the Company expects to see continued growth in demand for its automotive products, particularly in Asia Pacific and Europe, Middle East, Africa and Russia regions, where electric vehicles adoption rates are highest. In the industrial side of the business, the Company is expecting to benefit from infrastructure spending as new and upgraded communication networks are constructed and nuclear refurbishments continue in Canada, and federal stimulus packages are rolled out, while continuing to effectively manage the volatility of copper raw material costs.

3.0      CONFERENCE CALL AND ADDITIONAL INFORMATION

Shawcor will be hosting a Shareholder and Analyst Conference Call and Webcast on Wednesday, August 11^th, 2021 at 9:00 AM ET, which will discuss the Company’s Second Quarter 2021 Financial Results. To participate via telephone, please dial 1-877-776-4039 or 1-315-625-6955. Conference Call ID: 4849696. Alternatively, please go to the following website address to participate via webcast: https://edge.media-server.com/mmc/p/qkccm555

About Shawcor

Shawcor Ltd. is a global company serving various sectors of the Infrastructure, Energy and Transportation markets through three reporting segments:  Pipeline and Pipe Services, Composite Systems and Automotive and Industrial. The Company operates through a global network of fixed and mobile manufacturing and service facilities and is valued for its integrity, technology and proven capability to execute.

For further information, please contact:

Meghan MacEachern
Director, External Communications & ESG
Tel: 437-341-1848
Email: [email protected]
Website: www.shawcor.com

Source: Shawcor Ltd.
Shawcor.ER

4.0      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 level of the Company’s overall financial performance in 2021 as compared to 2020, including the likelihood of quarterly volatility, the achievement of quarterly normalized SG&A at anticipated levels, the continuance of certain raw material shortages and supply chain disruptions for the balance of 2021 and their abatement in early 2022, the demand for the Company’s products in each of its business segments, the successful execution by the Company of its existing order backlog, the impact of delays in final investment decisions and contract award decisions in respect of pipe coating projects and the effect on the time necessary to rebuild the Company’s order backlog, the anticipated increase in drilling and completion related capital spending in North America 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, the impact on the Company’s business of increasing adoption rates for electric vehicles, the impact on the Company’s operations arising from the flooding of the Company’s automotive facility in Germany and the Company’s ability to transfer production if required.

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: the duration and impact of the COVID-19 pandemic on the Company, its employees, customers, suppliers, energy and commodity markets and on the global economy, the impact on the Company of the continued heightened focus by North American oil and gas operators on capital discipline, the impact on the Company of reduced demand for its products and services, including the delay, suspension or cancellation of existing or anticipated contracts, as a result of lower investment in global oil and gas extraction, infrastructure and transportation activity following the previous declines in the global price of oil and gas, long term changes in global or regional economic activity and changes in energy supply and demand, which with other factors, impact on the level of global pipeline infrastructure construction; exposure to product and other liability claims; supply chain disruptions caused by extreme weather or other conditions; shortages of or significant increases in the prices of raw materials used by the Company; compliance with environmental, trade and other laws; political, economic and other risks arising from the Company’s international operations; the impact of climate change on the demand for the Company’s products and fluctuations in foreign exchange rates, 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 gradual lifting of certain COVID-19 related restrictions or their continuation on a more limited and targeted basis than the basis on which those restrictions were previously imposed and the impact thereof on global economic activity; the Company’s ability to manage supply chain disruptions caused by the COVID-19 pandemic, extreme weather or by natural disasters including the recent event of flooding in the Company’s operations in Germany; global oil and gas prices, the delay in the near term of certain projects and 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; the commencement of recovery of the global economy; a gradual recovery of oil and gas markets in North America, the continued improved demand in the automotive and industrial markets, particularly in North America and Europe and the heightened demand for hybrid and fully electric vehicles, tempered somewhat by automobile production delays arising from a global shortage of semi-conductors; sustained solid demand in the retail fuel market and stable demand in the industrial markets with storage tank demand supported by higher infrastructure spending and commercial and municipal water projects; heightened infrastructure spending in Canada on communication networks and nuclear refurbishments; the Company’s ability to execute projects under contract, the Company’s continuing ability to provide new and enhanced product offerings to its customers, the higher level of investment in working capital by the Company, the continued supply of and the stabilizing of pricing for commodities used by the Company and the ability of the Company to pass on price increases in respect thereof; the availability of personnel resources sufficient for the Company to operate its businesses, the Company’s ability to optimize its operational footprint while maintaining its competitive position 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 level of payments under the Company's performance, bid and surety bonds; the ability of the Company to satisfy all covenants under the Credit Facility; 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 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 in the oil and gas industry 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.

Pipeline and Pipe Services Segment

Composite Systems Segment

Automotive and Industrial Segment

Adjusted EBITDA Margin

Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue and is a non-GAAP measure. The Company believes that adjusted EBITDA margin is a useful supplemental measure that provides meaningful assessment of the business results of the Company and its Operating Segments from principal business activities excluding the impact of transactions that are outside of the Company’s normal course of business.

Adjusted Net Income (Loss) and Adjusted EPS

Adjusted net income (loss) is a non-GAAP measure defined as net income before acquisition-related and integration items, including transaction costs and financing fees; cost reduction and integration related initiatives such as separation benefits, retention payments, other exit costs, impact of inventory revaluation adjustment and certain costs associated with integrating an acquired company’s operations; gains or losses from early termination of debt and hedging activities; gains and losses on the disposal of land and other; gain on redemption of investment in associate; asset impairment charges; hyperinflation adjustment for Argentina; gain on sale of operating unit and the tax effect of the pre-tax adjustments above at applicable tax rates and certain other tax items. We define adjusted EPS as adjusted net income (loss) attributable to shareholders divided by the weighted average number of shares and the weighted average number of diluted shares.

Operating Margin

Operating margin is defined as operating income (loss) divided by revenue and is non-GAAP measure. The Company believes that operating margin is useful supplemental measure that provide meaningful assessment of the business performance of the Company and its Operating Segments. The Company uses this measure as key indicators of financial performance, operating efficiency and cost control based on volume of business generated.