Premier Tech

Premier Tech

January 06, 2005 17:06 ET

Premier Tech Repositions Itself to Improve its Earnings


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: PREMIER TECH

TSX SYMBOL: PTL.SV.A

JANUARY 6, 2005 - 17:06 ET

Premier Tech Repositions Itself to Improve its Earnings

RIVIERE-DU-LOUP, QUEBEC--(CCNMatthews - Jan. 6, 2005) - PREMIER TECH
(TSX:PTL.SV.A) announces its financial results for the second quarter
ended November 27, 2004.

THREE-MONTH PERIOD ENDED NOVEMBER 27, 2004

For the three-month period ended November 27, 2004, consolidated sales
stood at $73.8 million, an increase of $0.4 million from the second
quarter of the previous fiscal year. Sales remained fairly stable for
all corporate business units despite an almost 10.5% appreciation of the
Canadian dollar in relation to the US dollar. This appreciation had a
negative impact of $3 million on sales during the second quarter ended
November 27, 2004, compared with the second quarter ended November 29,
2003.

For the three-month period ended November 27, 2004, Premier Tech's net
loss stood at $2.7 million, or $0.16 per share, compared with net
earnings of $0.8 million, or $0.05 per share, for the same period of the
previous year.

The decline in earnings before other items during Q2 of 2004 compared
with Q2 of 2003 stems principally from the following factors. Firstly,
certain cost-cutting measures announced by Chronos Richardson Europe and
Erin Systems did not deliver the results expected; consequently, the
Company is now reviewing its approach with regards to these two
entities. Secondly, the poor climatic conditions for the peat harvest
during summer 2004 in Quebec, Manitoba and Saskatchewan triggered an
increase in Premier Horticulture's operating expenses. Thirdly, the
sustained appreciation of the Canadian dollar against the US dollar had
a $2.2 million negative impact on the Company. Fourthly, the Company
absorbed substantial cost increases in terms of freight and some
supplies, including steel and petroleum products.

Cash used for operating activities stood at $8.8 million for the second
quarter ended November 27, 2004, compared with $0.6 million for the
second quarter of the previous year. This variance is due to the decline
in Premier Tech's earnings and an increase in non-cash working capital
items.

SIX-MONTH PERIOD ENDED NOVEMBER 27, 2004

For the six-month period ended November 27, 2004, consolidated sales
stood at $136.8 million, a decline of 3.7% from the $142.1 million in
sales for the same period of the previous fiscal year. This lag stems
primarily from a reduction in shipments by Premier Tech Packaging and
Erin Systems in Europe, and the adverse impact of the appreciation of
the Canadian dollar relative to the US currency.

For the six-month period ended November 27, 2004, exchange rate
fluctuations against the Canadian dollar had a negative impact of $4.4
million on sales, compared with the same period the previous year.

During the first six months, the Company's net loss stood at $4.1
million, or $0.25 per share, compared with net earnings of $1.1 million,
or $0.07 per share, for the same period of the previous fiscal year.

The decline in earnings is a reflection of the factors discussed before
in the quarterly analysis, and of a decline in sales for the business
units Premier Tech Packaging and Erin Systems in Europe.

For the six-month period ended November 27, 2004, cash used for
operating activities were $13.3 million, compared with $7.7 million for
the first half of the previous fiscal year, representing a variance of
$5.6 million. This variance is primarily due to the decline in Premier
Tech's earnings.

OUTLOOK

Management deployed a process to review Premier Tech's organizational
and operational structures following negative developments for some
internal and external variables such as the depreciation of the US
dollar against other currencies, major changes in the transport
industry, adverse climatic conditions for the peat harvest in some
Canadian provinces, tough market conditions in Europe as well as some
difficulties and delays with the initiatives taken to reduce operating
costs. The goal of the process is to increase synergies between the
Company's business units, enhance the organization's agility and reduce
operating costs.

As for segmented earnings, Premier Horticulture (PHL) is pursuing
initiatives to improve its earnings. Major price increases, depending on
the product and market, have been announced for January 2005 to offset
the negative impact of appreciation in the Canadian dollar against the
US dollar. Additional surcharges on freight, effective in January 2005,
have also been communicated to customers; they are designed to reduce
the adverse impact of regulatory changes in the transport industry and
the increase in oil prices. Further measures, such as a continuous
improvement program, are also being deployed to cut operating expenses.

Also, the geographic and strategic distribution of PHL's bogs across
Canada and the United States, the level of safety inventory, and
strategic alliances with other producers will provide for sufficient
supply to the markets served by this business unit.

As announced on December 15, 2004, Premier Tech Packaging (PTP) will no
longer invest in the operations of the German firm Chronos Richardson
GmbH. Consequently, Chronos Richardson Europe is reorganizing its
operations and moving certain operations to other Premier Tech sites in
Asia, Canada, Italy and the United Kingdom. The German distribution
network will no longer exist, but marketing teams located elsewhere in
Europe will continue to service the clientele. These changes will cause
a decrease in PTP's sales in Europe but are designed to enhance
profitability in the long run. In North America, PTP's order book is
well stocked for the rest of the fiscal year.

As for Erin Systems (ESL), the business unit is putting on the back
burner its plan to acquire technology from partner Hartl. It is also
reviewing its European distribution networks, this new strategy aiming
at improving profitability as of the next fiscal year. However, it
should, in the short run, reduce ESL's operational volume and sales.

Premier Tech Environment (PTE) is managing a steady growth despite the
entry of new competitors and the changing regulatory environment into
some Canadian markets. The business unit is also actively developing new
products and markets.

Overall, Premier Tech believes that the review process of its
organizational and operational structures as well as the pursuit of
initiatives to improve its earnings will allow for a better position of
the Company in a difficult external environment.


-------------------------------------------------------------------
PREMIER TECH LTD.
(in thousands or dollars,
except for amounts per share)
2004 2003
-------------------------------------------------------------------
3 months to November 27, 2004
-------------------------------------------------------------------
$ $
Sales 73 775 73 421
Net earnings (loss) (2 704) 784
EBITDA 2 123 6 243
Earnings (loss) per share (0.16) 0.05
Operating cash flows (1 615) 2 475
Cash used for operating activities (8 784) (598)
--------------------------------------------------------------------
6 months to November 27, 2004
--------------------------------------------------------------------
$ $
Sales 136 800 142 109
Net earnings (loss) (4 117) 1 100
EBITDA 5 252 10 982
Earnings (loss) per share (0.25) 0.07
Operating cash flows (253) 5 848
Cash used for operating activities (13 262) (7 683)
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Weighted average number of 16 164 695 16 164 695
outstanding shares
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Profile

For nearly 80 years now, Premier Tech has been building its know-how and
reputation on the various technology-oriented opportunities offered by
sphagnum peat moss, an abundant natural resource in Canada. Its eleven
business units, which operate in five areas (Packaging, Environment,
Horticulture, Industrial and Life Sciences (have the mission to become
technological and commercial leaders in their respective fields of
expertise. Buoyed by a multidisciplinary team of nearly 1 500 people
based in America, Europe and Asia, Premier Tech is building on the
development of its personnel, research, development and innovation, the
introduction of value-added products and proactive management of its
business units' manufacturing operations. Its strategic approach is
supported by ongoing worldwide market development efforts. Premier Tech
shares are listed on the Toronto Stock Exchange, in Canada, under the
symbol PTL.SV.A.

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Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Premier Tech
    Mr. Christian Dollo, Senior Vice-President
    Chief Financial Officer
    (418) 867-8883 Ext. 6383
    (418) 867-8297 (FAX)
    dolc@premiertech.com