ProSep Posts Positive Third Quarter Results
ProSep has announced its financial results for the three and nine-month periods ended September 30, 2008. All amounts are reported in Canadian dollars unless otherwise stated.
- Revenues increased by 42% and totalled $36.8 million for the nine-month period ended September 30, 2008 compared with revenues of $25.9 million for the corresponding period of 2007.
- EBITDA* for the third quarter was $1.3 million, the second consecutive quarter of positive performance.
- Signed $11 million in new contracts during the quarter. Current sales backlog stands at $27 million.
- Appointed David Laidley, Chairman Emeritus of Deloitte & Touche LLP, to the Company’s Board of Directors.
- Named Patrice Daignault as Chief Financial Officer and Corporate Secretary effective September 2nd.
- Signed customer agreements to supply processing, treatment and separation solutions for use by leading energy companies, including BP Exploration Alaska, Petronas, ENI S.pA., Ingaip D.O.O., and PEMEX.
- Obtained ISO 9001:2000 Certification for South East Asian operations.
- Received Deloitte Technology Green 15 Award in recognition of the quality of its process solutions for upstream oil and gas companies.
"ProSep has undergone a significant turnaround over the past 12 months," said Jacques L. Drouin, President and CEO of ProSep Inc. "The successful integration of Pure Group into our operations has enabled us to expand our product offerings and increase our sales backlog. We are now well structured and operationally profitable and are well on our way to becoming a leading provider of process solutions to the oil and gas industry."
As announced previously, the Company acquired Pure Group AS in October, 2007. Management believes that any comparisons with periods prior to the acquisition may not be meaningful.
For the nine-month period ended September 30, 2008 ProSep reported revenues of $36.8 million an increase of 42% from $25.9 million generated during the corresponding nine-month period of 2007. For the third quarter of 2008 revenues were $12.5 million. The Company recognizes revenues on a percentage of completion basis and operates in an industry that typically has long sales and production cycles. As a result, quarterly sales variations are to be expected and may not be an indication of a longer-term trend.
Gross margin was $4.4 million or 35% of revenues for the third quarter and $11.5 million, or 31% of revenues for the nine-month period ended September 30, 2008. In third quarter of 2008, margins improved by approximately 10% sequentially over the second quarter of 2008. The margin improvement was positively impacted by the reversal of a warranty provision of $1.3 million out of the total $2.6 million provision taken during the second half of fiscal 2007 relating to the delivery of the seven TORRTM water treatment systems sold to SK Engineering & Construction.
EBITDA for the third quarter of 2008 was $1.3 million, compared to EBITDA of $1.4 million for the preceding second quarter of 2008. EBITDA for the first nine months of 2008 was $2.2 million compared to negative EBITDA of $5.5 million for the same period of 2007.
Sales and marketing expenses were $490,000 for the three-month period and $1.5 million for the nine-month period ended September 30, 2008. The majority of these expenses relate to salaries, marketing, promotional and travel activities.
Research and development expenses were $350,000 for the three-month period and $900,000 for the nine-month period ended September 30, 2008. These expenses consist mostly of salaries and are dedicated to expanding the Company’s proprietary product offering.
General and administrative (“G&A”) expenses were $2.3 million or 18% of sales for the three-month period and $6.9 million or 19% of sales for the nine-month period ended September 30, 2008. The majority of these expenses relate to salaries, including benefits and option costs, and professional fees, which include regulatory fees, legal fees, accounting and audit fees, investor and public relation fees and consulting fees, and office infrastructure related expenses.
The Company reported net income of $1.8 million or $0.03 per share for the third quarter of 2008 compared with a net loss of $3.0 million or ($0.07) per share for the three-month period ending September 30, 2007. Net income for the three-month period ended September 30, 2008 was positively impacted by the reversal of a $1.3 million warranty provision and an unrealized foreign exchange gain of $1.9 million, most of which is a consequence of the Norwegian division’s balance sheet conversion. For the nine-month period ended September 30, 2008, ProSep reported a net loss of $1.7 million or ($0.03) per share compared with a net loss of $7.9 million for the nine-month period ending September 30, 2007 or ($0.17) per share. Year-to-date, a total foreign exchange gain of $0.5 million was recognized.
At September 30, 2008, ProSep held cash and cash equivalents of $5.9 million.
"While international oil and gas prices have dropped recently, we have not experienced any softening of demand for our process solutions," said Drouin. "Given our sales backlog, customer commitments to CAPEX spending, and our current pipeline of opportunities, our prospects for growth for the balance of the year and into 2009 remain encouraging. Nonetheless, we believe that the current financial crisis and overall weakening of the global economic conditions as well as further declines in the price of oil may have an adverse impact on future results."