IBC Advanced Alloys Corp.
TSX VENTURE : IB
OTCQB : IAALF

IBC Advanced Alloys Corp.

October 27, 2016 17:01 ET

IBC Advanced Alloys Reports Fiscal Q4 and Year-End Results for 2016

Company Also Provides An Update on its Capital Improvements Program, Which is Designed To Driver Higher Sales and Revenue in 2017

FRANKLIN, INDIANA--(Marketwired - Oct. 27, 2016) - IBC Advanced Alloys Corp. ("IBC" or the "Company") (TSX VENTURE:IB)(OTCQB:IAALF) announces its financial results for the fiscal year ended June 30, 2016. The Company's financial statements, management's discussion and analysis, and annual information form are available for review at www.sedar.com.

Fiscal Q4 and Year-End Highlights

(All financial amounts in US$)

  • The Company recorded a loss of $3.9 million, or ($0.33) per basic and diluted share, for the year ended June 30, 2016. That compares to a loss of $2.8 million, or ($0.35) per basic and diluted share, in fiscal 2015. For the three months ended June 30, 2016, the Company lost $1.1 million, which compares to a loss of $1.0 million in the fiscal fourth quarter of 2015.
  • Annual revenue for fiscal 2016 was $16.4 million, a decline of 7.9% as compared to revenues of $17.8 million in fiscal 2015.
  • In fiscal 2016, Engineered Materials division sales increased 65% while Copper Alloys division sales declined 21%. Operating performance improved in the fourth fiscal quarter: fiscal Q4 2016 sales rose 33% in the Engineered Materials division, and sales increased 11% in the Copper Alloys division, both as compared to the prior-year period.
  • In June 2016, IBC signed a joint development agreement with BAE Systems for the production of prototype Beralcast® components. Work continues to progress under this agreement toward potential product sales.
  • In September 2016, IBC was accepted as an approved forging supplier by Newport News Shipbuilding and by General Dynamics' Electric Boat Corporation, two of the world's largest shipbuilding companies.
  • The Company reports continued good progress toward implementing equipment upgrades and production capacity expansions across both operating divisions. These upgrades are designed to help improve rates and yields, decrease outsourcing, and convert a higher level of product quotes into sales.

Commentary and Corporate Update

"2016 was clearly a transition year for IBC and our financial performance reflects this, but we continue to make steady progress toward our goal of achieving cash-flow positive operations in 2017," said Major General Duncan Heinz (USMC, Ret.), IBC's President and Chief Executive Officer. "We are executing on our equipment upgrades and capacity expansion across both operating divisions, and we fully expect these structural improvements to improve yields, boost production capacity, lower costs, and help us convert on a higher percentage of sales opportunities. I look forward to seeing these efforts complete in 2017."

Specifically, the Company reported these advancements in its capital improvements program:

Engineered Materials Division:

  • Ordered a new Vacuum Induction Melting Furnace for installation in calendar Q1 of 2017. This equipment is designed to increase production uptime and rate, as well as to enable sales growth in the aerospace and commercial sectors.
  • Purchased and installed a new Digital Radiography Quality Control System for its defense and aerospace related production. This system is designed to improve efficiencies and reduce production costs.
  • Ordered new Tumble Blast Finishing equipment, scheduled to be operational in calendar Q4 of 2016. This equipment is expected to improve production throughput and provide additional cost savings.
  • Ordered for installation in calendar Q1 of 2017 a new Casting De-Wax Station, which is aimed at reducing outsourcing requirements, cutting costs, and increasing manufacturing throughput.
  • Preparing to purchase and install in calendar Q2 of 2017 an advanced Wax Injection System, which is expected to boost throughput.

Copper Alloys Division:

  • Ordered a new Solution Annealing Furnace for the Franklin, Indiana facility, which is planned for installation in calendar Q1 of 2017. This unit should facilitate expanded sales and revenue from current business lines, as well as an expansion into new product lines.
  • Continuing to shore up inventory stocks in order to (1) convert a higher percentage of orders into sales through stronger fulfillment capabilities, and (2) expand sales and revenue from current business lines.

"Since completing our financing in May 2016, we also have strengthened our Board of Directors, undertaken new business development initiatives, expanded our plant management in Wilmington, MA, closed our Vancouver, BC corporate office, and sharpened our focus on product-focused marketing," General Heinz said.

The Company also announces that Anthony Dutton has agreed to resign as a director and officer of the Company, effective October 31, 2016. The Company thanks him for his contribution to the development of the Company.

Highlights of Financial Results by Operating Division

Engineered Materials

Engineered Materials division sales increased 65% in fiscal year 2016 over 2015, and fiscal Q4 2016 sales rose 33% over the prior year period. The Company anticipates higher Engineered Materials sales in 2017 based on the following:

  • Anticipated increased orders for Beralcast™ beryllium-aluminum cast parts from Lockheed Martin for the F-35 Joint Strike Fighter, following negotiations for the next lot of components, and;
  • Increased component orders for the precision electronics manufacturing sector.

Additionally, the Company is developing other sales opportunities for Beralcast™ components with BAE Systems (see previous news here), as well as other defense and non-defense sector companies.

In 2016, the Engineered Materials division's gross profit margin was adversely affected by fixed costs being spread over a small sales volume. In the short term, material and supplies costs are the only significant variable expense. IBC expects that if Engineered Materials sales continue to increase, gross margin will improve as fixed costs are allocated to larger sales volumes. The Company also expects that planned capital expenditures will improve operating results over the course of fiscal 2017.

Copper Alloys

While Copper Alloys division sales declined 21% in fiscal 2016 over the prior year, fiscal Q4 2016 sales rose 11% as compared to the prior-year period.

The Copper Alloys division's gross profit has been adversely affected by a combination of declining sales and significant fixed operating costs. Average COMEX Copper values declined 23% in fiscal 2016 compared to fiscal 2015. If IBC's sales prices immediately followed this trend, sales would have declined by $2.9 million; instead, the Company was able to hold prices relatively steady as inventory turned and sales dropped by just over $1 million. A decline in production volume decreased sales by $998 in fiscal 2016 compared to 2015. Changes in by-product sales ($788 decline) and sales mix ($323 decrease) accounted for the remainder of the difference. The Company seeks to pass price changes (favorable or unfavorable) through to customers, but sharp declines in price adversely affect IBC's profitability due to holding losses on inventory. The increase in Copper Alloys expenses is primarily due to a bad debt recovery booked in the prior year and reduced salary allocations to Engineered Materials.

On Behalf of the Board of Directors:

Duncan Heinz, President, CEO and Director

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 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 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".

@IBCAdvanced $IB $IAALF #Beryllium #Beralcast

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 operates, industry conditions, 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.

This release does not constitute an offer to sell or a solicitation of an offer to buy of any of the Company's securities in the United States. The securities described herein have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or any state securities laws, and may not be offered or sold within the United States or to, or for the benefit of, U.S. persons (as defined in Regulation S under the U.S. Securities Act) except in compliance with the registration requirements of the U.S. Securities Act and applicable state securities laws or pursuant to exemptions therefrom.

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