Highlights
- IBC posted a 36% increase in year-on-year sales revenue, with Engineered Materials division sales up 142% and Copper Alloys division sales 7% higher.
- The Company swung to a positive gross margin of 9% on a consolidated basis in the quarter, compared to a negative 15% gross margin in the comparable year-ago period, and a 0% gross margin for all of FY2016.
- The Company narrowed its operating loss in the quarter to US$0.02 per share, as compared to a US$0.07 loss in the preceding quarter and a
US$ 0.05 loss in the comparable year-ago period.
- Significant personnel issues in one key manufacturing department of the Copper Alloys division early in the quarter slowed progress toward profitability, but the Company is working toward a goal of achieving profitability in the quarter ending March 31, 2018.
FRANKLIN, IN – November 20, 2017 – IBC Advanced Alloys Corp. (“IBC” or the “Company”) (TSX-V: IB; OTCQB: IAALF) announces its financial results for the quarter ended September 30, 2017, which is the Company’s first fiscal quarter of 2018.
Sales increased 36% in the quarter as compared to the quarter ended September 30, 2016, with Engineering Materials division sales expanding by 142%. Both operating divisions swung to positive gross margins from negative gross margins in the year-ago period. The Company narrowed its per-share loss in the quarter on both a sequential and year-on-year basis, and is working to achieve profitability in the quarter ending on March 31, 2018.
“We made good progress in this past quarter, in spite of some challenges, and we continue to advance toward our goals of becoming profitable and continued market penetration,” said Major General Duncan Heinz (USMC, Ret.), President, CEO and Director of IBC. “Engineered Materials division sales grew sharply in the quarter, and that division is now very close to profitability. Our Copper Alloys division also is trending in the right direction now that they are largely past a temporary loss of personnel on the factory floor in our Franklin, IN plant that unexpectedly impacted them last quarter.”
“Corporate costs have decreased significantly, and we achieved a significant swing to positive gross margins across both operating divisions,” the General noted. “I think it is reasonable to expect profitability in the fiscal third quarter, given that there are likely some product delivery timing issues that we could encounter in December that might delay recognition until Q3. That said, I very much like IBC’s trajectory, and I expect we will be able to show additional progress toward profitability in fiscal Q2.”
“The challenges we faced in the first month of fiscal Q1 were the result of a combination of significant real-life personnel issues in one key manufacturing area in the Copper Alloys division,” the General said. “As a result, we failed to deliver on orders in July, which pushed deliveries beyond due dates. As a result, orders for Q2 flattened somewhat because of our temporary inability to meet delivery commitments. However, I am very pleased to report that customers have remained loyal, and we are now seeing orders on the rise, including orders from both existing and new customers that are driven in part by our expanded production capabilities with the solution annealing furnace and quench tank that we installed earlier this year.”
“Our EMC division is really starting to hit its stride now, and we are continuing to improve rate, throughput, and performance with our upgraded beryllium-aluminum alloy furnace and with the advanced support infrastructure we have deployed along with it,” he said. “In addition to delivering our innovative precision-cast Beralcast® products to current customers, we continue to work toward commercialization of additional Beralcast® products for other defense and non-defense applications.”
“Our team’s work to develop scandium-contained alloys is also progressing,” General Heinz added. “While our business strategy in this effort must remain confidential at this point, we will make announcements as appropriate. What I can say with confidence is that the markets are there for the innovative alloys we intend to develop. We have a solid plan to penetrate our target markets with these products.”
The Company’s fiscal Q1 2018 financial statements and management’s discussion and analysis are available for review at www.sedar.com. Below are some highlights of the results.
Fiscal Q1 2018 Highlights
(All financial amounts in US$)
Consolidated Results
- Sales revenue for the quarter totaled $4.3 million, a 32% increase over sales of $3.6 million for the quarter ended on September 30, 2016, and a 2.7% increase over the preceding quarter.
- The Company narrowed its loss in the quarter to $602,000, or ($0.02) per basic and diluted share. This compares to a loss of $1.6 million, or ($0.05) per share, in the comparable year-ago period, and a loss of $2.2 million, or ($0.07) per share, in the preceding quarter.
- Gross profits and gross margin swung to positive territory as compared to the quarter ended September 30, 2016. Gross profit totaled $396,000, compared to a gross loss of $479,000 in the year-ago period. Gross margin rose to 9%, compared to a gross margin of negative 15% in the comparable year-ago period, a gross margin of 6% in the preceding quarter, and a 0% gross margin for FY2016.
- Corporate expenses decreased 55% to $198,000 from expenses of $440,000 in the quarter ended September 30, 2016, largely due to savings achieved by closing the Company’s Vancouver office in fiscal 2017. Corporate expenses were higher on a sequential basis, however, as the Company recovered professional fees expense at its fiscal year end.
- As of September 30, 2017, the Company reported a working capital deficiency of $867,000, including cash of $463,000. This compares to a working capital deficiency of $1.5 million at June 30, 2017. The Company noted that it expects to seek additional funds in the short-term to finance working capital and growth initiatives, and is examining a range of options including debt financing, possible asset sales, and other alternatives.
Copper Alloys Segment Results
- Copper Alloys sales increased 7% in the quarter to $2.9 million, compared to sales of $2.7 million in the quarter ended September 30, 2016. Sales declined 8% from $3.1 million in the preceding quarter, due largely to labor shortages in the Company’s Franklin forging facility early in the quarter. This was partially offset by increased sales through the Company’s Royersford, PA foundry, particularly to customers supplying the material. Management believes that customers delayed orders during this time, and order bookings are expected to improve.
- Other financial results for the quarter, on a year-on-year basis, included these:
- Average selling prices increased 10% in the quarter, partially offsetting a decline in overall sales volume. Sales to metal service center customers decreased slightly, while most other market sectors improved, particularly original equipment manufacturers.
- Operating losses were cut by 46% to a loss of $269,000 from a loss of $498,000;
- Cost of sales declined 3.6% to $2.6 million from $2.7 million;
- Order bookings increased 15% to $3.1 million from $2.7 million. Order backlog in the quarter decreased 20% to $2.9 million from $3.6 million in the preceding quarter; and
- Gross margin for Copper Alloys swung to a positive 8% from a negative 2%.
- Looking forward, the Company expects its Copper Alloys division sales to increase as it begins shipping all awarded forged and machined copper alloy products to a Fortune 100 electronics manufacturer. IBC has been shipping two qualified parts to this customer and has produced samples of the remaining four parts that have been ordered, and are currently undergoing first article inspection.
Engineered Materials (EMC) Segment Results
- EMC division sales rose sharply in the quarter, up 142% to $1.5 million, compared to $598,000 in the year-ago period. Sales also increased sequentially, up 34% from $1.1 million in the quarter ended June 30, 2017. Sales volumes of both commercial castings and aerospace and defense castings increased significantly. Gross profit increased $593,000, from a loss of $418,000 in the year-ago period to a profit of $175,000, due to the volume increases. Operating losses decreased $591,000, from a loss of $659,000 in the year-ago period to a loss of $68,000, due to improved gross profit.
- While the company completed structural upgrades and sub-systems to its new beryllium-aluminum alloy furnace in May 2017, it temporarily halted production as the existing furnace components were removed and the new components installed. While production was halted, it continued to ship commercial castings from stock. Sales volumes of commercial castings increased slightly, while sales volumes of aerospace and defense castings increased 267%. Gross profit improved $319,000 as production resumed. Operating losses decreased by 84% to a loss of $68,000, from a loss in the preceding quarter of $430,000. Gross margin improved sequentially to a positive 12% from a negative 13%.
- Following installation and commissioning in May 2017 of a new vacuum induction melting (VIM) furnace in the division’s Wilmington, MA production facility, the Company also installed advanced automation and real-time process monitoring systems, thereby facilitating a significant step-change in capability. With improved cycle time, the daily melt capacity in the EMC division has increased by 25%. Combined with additional shifts, reduced maintenance down-time, and expected yield improvements, this capital improvement has positioned EMC to significantly increase output to meet increased customer demand.
- The Company reported that it is continuing to make deliveries to Lockheed Martin of azimuth gimbal housings for the F-35 Lightning II jet fighter under the Low Rate of Production (LRIP) lot 11. This the third contract awarded to the Company by Lockheed Martin for the precision-cast beryllium-aluminum alloy (Beralcast®) part that is integrated into the F-35. The first contract, awarded in September 2014, was for LRIP lots 7 and 8, and the second contract awarded in August 2015 was for LRIP lots 9 and 10.
- In addition to the Company’s previously announced contracts with Lockheed Martin and Raytheon, it currently is pursuing other sales opportunities with several defense and aerospace companies.
For more information on IBC and its innovative alloy products, go here.
On Behalf of the Board of Directors:
“Duncan Heinz”
David “Duncan” Heinz, President, CEO and Director
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About IBC Advanced Alloys Corp.
IBC is a leading beryllium and copper advanced alloys company serving a variety of industries such as defense, aerospace, automotive, telecommunications, precision manufacturing, and others. IBC’s Copper Alloys Division manufactures and distributes a variety of copper alloys as castings and forgings, including beryllium copper, chrome copper, and aluminum bronze. IBC’s Engineered Materials Division makes the Beralcast® family of alloys, which can be precision cast and are used in an increasing number of defense, aerospace, and other systems, including the F-35 Joint Strike Fighter. IBC’s has production facilities in Indiana, Massachusetts, Pennsylvania, and Missouri. The Company’s common shares are traded on the TSX Venture Exchange under the symbol “IB” and the OTCQB under the symbol “IAALF”.
Contact:
Jim Sims, Director of Investor and Public Relations
+1 (303) 503-6203
Email: [email protected]
Cautionary Statements
This news release was prepared by management of IBC, which takes full responsibility for its contents. The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy of this news release. Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. This disclosure contains certain forward-looking statements that involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company’s control including: the impact of general economic conditions in the areas in which the Company or its customers operate, including the semiconductor manufacturing and oil and gas industries, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, limited availability of raw materials, fluctuations in commodity prices, foreign exchange or interest rates, stock market volatility and obtaining required approvals of regulatory authorities. In addition, there are risks and uncertainties associated with manufacturing activities therefore the Company’s future results, performance or achievements could differ materially from those expressed in these forward-looking statements. All statements included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on assumptions made by the Company based on its experience, perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances.
