BioteQ Environmental Technologies Inc.
TSX : BQE

BioteQ Environmental Technologies Inc.

August 07, 2013 17:00 ET

BioteQ Releases Results for Q2 2013

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Aug. 7, 2013) - BioteQ Environmental Technologies Inc. (TSX:BQE), a leader in industrial wastewater treatment, releases its financial and operating results for the second quarter ended June 30, 2013. Further information on the second quarter results can be obtained from the Company's Unaudited Condensed Consolidated Interim Financial Statements and Management's Discussion and Analysis ("MD&A").

BioteQ will hold a conference call on August 8, 2013 at 11:00 AM EDT to discuss results for Q2 2013. Participants can dial in as follows:

North America: 1-416-644-3421; 1-866-250-4877 (toll free)
United Kingdom: 44-20-7190-1595; 0800-358-5256 (toll free)
Switzerland: 41-22-592-7311; 0800-560-749 (toll free)
Participant pass code: 4634361

As noted at the beginning of 2013, due to recent changes in Generally Accepted Accounting Standards ("GAAP") effective Q1 2013, the results of the Company's joint ventures will be accounted for as equity investments in BioteQ's current and future financial statements. In prior years, the results of the Company's joint ventures were accounted for through proportionate consolidation.

To ensure clarity and comparability with historic results, certain statements in this news release and in the MD&A are characterized as BioteQ's "proportional" share, which means the effective portion of results that BioteQ would have reported if each of its joint ventures had been reported in accordance with past accounting standards. For further details, please see "Non-GAAP Financial Measures" in the Company's Q2 2013 MD&A.

Q2 2013 Financial and Operational Results

The macro environment for the mining sector has recently been challenging. This has had implications for BioteQ's 2013 performance. There were however a number of very positive developments for the Company during the first six months of the year. In particular, BioteQ announced capital investments in new treatment facilities that will begin to generate revenues in 2014 and will contribute to the company's financial performance for many years to come.

Current Macro Environment

During the past few months the global mining industry has come under significant pressure. Observers of the industry will have noted that:

  • Metals prices have fallen;
  • The market capitalization of many mining companies have fallen;
  • The financing window has been largely closed to both junior and major mining firms; and
  • A number of mining companies have announced restraints on/reductions in capital and operating spending levels.

The general downturn in the mining industry has had an impact on firms that are suppliers to the industry. BioteQ has not been immune from these effects. Key impacts for BioteQ resulting from the slowdown have been:

  • Copper prices have declined from approximately US $3.70/lb at the beginning of the year to approximately US $3.10-3.15/lb. Given that a significant portion of BioteQ's current recurring revenue base is generated from copper recovered by our plants, the decline in copper pricing has had and is expected to have a negative impact through 2013; and
  • The capital and operating cost restraint being imposed within the industry has resulted in the cancellation or delay of several projects BioteQ had been actively working on. These cancellations and suspensions have occurred within the past quarter and have impacted management's perspective with regard to the financial and operating outlook for 2013.

Q2 2013 Financial Results

  • Proportional revenue for Q2 2013 was $2 million compared to $2.4 million in Q2 2012. Year to date, Proportional revenue was $4 million compared to $4.6 million in 2012. The decline in revenue compared to the prior year quarter was mainly due to lower copper prices compared to the prior year quarter.
  • Proportional gross margins for Q2 2013, which include BioteQ's share of joint venture activities, were $726,000 compared to $739,000 in Q2 2012. Lower margins due to decreased copper prices in 2013 were largely offset by higher margins on engineering service revenues.
  • Revenue as reported under GAAP was $924,000 in Q2 2013 compared to $1 million in Q2 2012.
  • Net loss for the quarter was $844,000 in Q2 2013 compared to net income of $75,000 in Q2 2012.
  • Comprehensive loss for Q2 2013 was $438,000 compared to comprehensive income of $167,000 in Q2 2012.
  • Adjusted EBITDA for the quarter was ($468,000) compared to $522,000 in Q2 2012. The decrease in Adjusted EBITDA in Q2 2013 vs. Q2 2012 was the result of the recognition of a one-time recovery of $1.2 million in 2012 related to the settlement of an outstanding dispute and the sale of the relevant asset to NWM Mining.

Operational Results

  • The Bisbee, Arizona operation recovered approximately 119,000 pounds of copper during the second quarter. Year to date, the plant has recovered 259,000 pounds of copper. The operation is expected to recover approximately 600,000 pounds of copper over the full year.
  • The Dexing, China operation recovered approximately 592,000 pounds of copper during the second quarter. Year to date, the plant has recovered 1.1 million pounds of copper. The operation is expected to recover approximately 1.8 million pounds of copper over the full year.
  • The Raglan plant commenced operations slightly later than expected due to spring thaw conditions. The plant however is operating well and BioteQ expects that year end results from the plant will be in line with expectations.
  • BioteQ is in the process of constructing and commissioning three plants in China with its joint venture partner, Jiangxi Copper Company ("JCC"):
    • A nickel/cobalt recovery ion exchange plant is in the final stages of optimization and is expected to begin full commercial production during the upcoming quarter.
    • Construction of a second copper recovery plant at the Dexing site, announced in late 2012, has experienced some delays with site preparation work due to a number of site specific issues. Rather that starting up in Q3/Q4 2013 as had previously been anticipated, the plant is now expected to start up in Q2 2014.
    • On August 1, 2013 BioteQ announced that it and JCC would be building a copper recovery plant at the Yinshan mine. BioteQ expects that the Yinshan plant will start up in Q2 2014.
    • Collectively these three new plants in China represent significant financial and personnel investments by BioteQ in 2013. However, while these plants will not add to 2013 financial performance, they will add significant revenues to the company's recurring revenue base in 2014 and beyond.
    • Collectively these three plants are expected to add approximately $2.0 million in BioteQ's Proportional Revenues in 2014 and approximately $3.0 million in 2015 and beyond.
    • Combined with our other existing recurring operations, total proportional revenue is expected to be in the range of $7.5 million in 2014 and $8.5 million annually in 2015 and beyond once all plants are fully operational (vs. approximately ~$5.5M million currently). These additions to BioteQ's current recurring revenue base will make a significant ongoing contribution to the company achieving a sustainable cash positive position as early as 2014.
  • BioteQ's work relating to the design and construction of a Selenium pilot plant (Selen-IX™) to be utilized at a Teck Resources ("Teck") site, continued to progress on schedule. The plant is expected to be operational in August. BioteQ expects to conclude testing activities at the Teck site in December. Revenue associated with this contract is derived from operating services and plant leasing fees.
  • Concurrent with the construction of the Selenium pilot plant, BioteQ is working to clearly define additional application areas and customer sites for its Selen-IX™ technology. BioteQ sees the selenium market in North America as being one that will grow into a large market over the coming years. It is a market space that BioteQ believes can significantly assist in driving significant growth in BioteQ's business.
  • During Q2 2013, BioteQ continued to provide technical support services to Kinross at a mine site in South America. BioteQ has been working with Kinross over the past 18 months providing technical support services for plant start-up and operations. Kinross had an option to conclude the contract at the end of June. In May, Kinross informed BioteQ that it wished to conclude the contract as of July 7, 2013 in order to reduce internal expenditure levels. BioteQ's work at the Kinross site has thus now ended.
  • Given the uncertainty that presently exists within the overall mining market, BioteQ has implemented a program focused on minimizing discretionary spending until such time as the environment improves. Savings generated from this program are expected to be approximately $700,000 from vs. our originally planned 2013 expenditures.

Outlook

As previously noted, BioteQ has seen a general downturn in the mining industry. This downturn has, not surprisingly, had an impact on firms that are suppliers to the industry. BioteQ has not been immune from these effects:

  • The recent decline in metal prices has impacted the financial performance of BioteQ's copper recovery operations.
  • In addition, constraints that have been imposed on capital spending by mining companies have resulted in the cancellation or delay of several projects on which BioteQ had been actively working.
  • Finally, delays in completing and starting up the second copper recovery plant at the Dexing site has also impacted anticipated financial performance for the year.

However, while the general downturn in the mining industry has tempered BioteQ's expectations regarding its 2013 financial results, management remains very positive regarding prospects for 2014 and beyond. Specifically:

  • Within the next 12 months, BioteQ will have operational three new recurring revenue generating assets which will bring the Company's recurring revenues to approximately $8.5 million/year from the current level of approximately $5.5 million/year;
  • The interest that has been expressed in BioteQ's new, early commercial technologies relating to selenium and sulphate removal - including our recently announced ~$900,000 contract with Teck Resources - offer significant promise; and
  • BioteQ continues to see significant demand and numerous interesting opportunities for deployment of our traditional metals recovery technologies - several that we expect will move forward as the mining sector achieves some greater degree of stability.

Management has assessed the impacts associated with project cancellation and project delays in 2013 and is providing an update to 2013 guidance as follows:

  • Proportional Revenue: At the beginning of 2013 BioteQ had been targeting to grow revenue in 2013, on a proportionate revenue basis, by 25% over 2012 to approximately $11.8 million. BioteQ is now forecasting proportional revenue to be in the range of $8.5 million to $9.5 million - similar to the $9.4 million achieved in 2012.

    Despite the general downturn in the mining industry and delay/cancellation of a number of projects BioteQ had been working on or pursuing, BioteQ remains positive with respect to several near term opportunities. The timing associated with closing these prospects will have a significant impact on the amount of revenue that will be recognized in 2013.
  • Adjusted EBITDA: BioteQ had been targeting to improve Adjusted EBITDA by approximately 50% to less than ($1) million from ($1.9) million in 2012. Based on the current proportional revenue outlook, BioteQ now expects Adjusted EBITDA to be in the range of ($1.5) million to ($2.0) million.

    Observers should note that our Adjusted EBITDA forecast for 2013 does not, as the 2012 results did, benefit from a $1.2 million one-time recovery related to the settlement of a dispute and sale of an asset to NWM Mining.

The fact that BioteQ expects Adjusted EBITDA performance to be better than - or at worst the same as - 2012 results, reflects the significant cost control and reduction measures that have been implemented by the company in response to market conditions. These measures have included reductions in personnel and compensation costs, planned marketing and sales initiatives, and in general and administrative costs.

Second Quarter 2013 Financial Highlights Summary
Unaudited, in $'000 except for per share amounts Q2
2013
Q2
2012
To
Jun 30,
2013
To
Jun 30,
2012
$ $ $ $
Revenues 924 1,030 1,720 2,409
less: Plant & other operating costs (excluding depreciation) 654 1,023 1,262 1,982
270 7 458 427
General and administrative expenses 1,067 928 2,037 2,021
Sales and development 449 360 923 672
Share of results of equity accounted joint ventures (184) (354) (317) (415)
(1,062) (927) (2,185) (1,851)
Depreciation and amortization 127 128 273 252
Stock-based compensation 31 38 66 60
Loss before other income (expenses) (1,220) (1,093) (2,524) (2,163)
Other income - net 14 16 107 97
Reversal of capital asset impairment 200 1,227 400 1,227
Gain on disposal of equipment 239 - 239 -
Income tax (78) (75) (80) (75)
Net loss for the period (845) 75 (1,858) (914)
Cumulative translation adjustment 406 92 553 19
Comprehensive loss for the period (439) 167 (1,305) (895)
Net loss per share (basic and diluted) (0.01) 0.00 (0.03) (0.01)
Proportional Revenue* 2,008 2,399 3,946 4,578
Adjusted EBITDA* (466) 523 (1,220) (220)
at
Jun 30,
2013
at
Dec 31,
2012
$ $
Cash, restricted cash and short term investments 3,154 3,868
Proportional share held in joint ventures 3,316 3,660
Total cash, restricted cash and short term investments 6,470 7,528
Working capital 3,755 3,829
Total assets 13,020 14,578
Total long term liabilities 37 43
Shareholder's equity 11,508 12,747
* See "Non-GAAP Measures" in the Company's Q2 2013 MD&A

For a complete set of Financial Statements and Management Discussion and Analysis, please go to www.bioteq.ca

BioteQ Corporate Profile

BioteQ is an innovative clean technology leader in global industrial water treatment, serving the mining and energy markets. The company's proven technologies have been applied at sites around the world to recover dissolved metals and remove sulphate, producing clean water and eliminating residual waste. BioteQ is headquartered in Vancouver, Canada and trades on the TSX under the symbol BQE. Please visit our website at www.bioteq.ca for additional information.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or the accuracy of this release.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain information contained herein may not be based on historical fact and therefore constitutes "forward-looking information" under applicable Canadian securities legislation. This includes without limitation statements containing the words "plan", "expect", "project", "estimate", "intend", "believe", "anticipate", "may", "will" and other similar words or expressions. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks, uncertainties and other factors that may cause actual events or results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the Company's dependence on key personnel and contracts, uncertainty with respect to the profitability of the Company's technologies, competition, technology risk, the Company's ability to protect its intellectual property and proprietary information, fluctuations in commodity prices, currency risk, environmental regulation and the Company's ability to manage growth and other factors described in the Company's filings with the Canadian securities regulators at www.sedar.com (including without limitation the factors described in the section entitled "Risks and Uncertainties" in the Company's Annual Report for the year ended December 31, 2011 and the section entitled "Risk Factors" in the Company's Annual Information Form for the year ended December 31, 2011). Given these risks and uncertainties, the reader is cautioned not to place undue reliance on forward-looking statements. All forward-looking information contained herein is based on management's current expectations and the Company undertakes no obligation to revise or update such forward-looking information to reflect subsequent events or circumstances, except as required by law.

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