Novamerican Steel Inc.
NASDAQ : TONS

Novamerican Steel Inc.

March 29, 2007 12:37 ET

Novamerican Reports 37th Consecutive Profitable Quarter

MONTREAL, QUEBEC--(CCNMatthews - March 29, 2007) -

Attention Business/Financial Editors:

Novamerican Steel Inc. (NASDAQ:TONS) announced today its financial results for the first quarter ended February 24, 2007. (All amounts are in U.S. dollars).



SUMMARY OF FINANCIAL HIGHLIGHTS

(in thousands of U.S. dollars, except per share and tons data)
QUARTER ENDED
---------------------------------------------
February 24, 2007 February 25, 2006 Change
------------------ ---------------- -------

Net sales $187,190 $ 195,702 ($8,512)
Gross margin 18.6% 21.6% -3.0%
Net income $ 5,178 $ 8,843 ($3,665)
Basic income per share $ 0.50 $ 0.87 ($0.37)
Diluted income per share - $ 0.85 ($0.85)

Tons sold 203,392 215,868 (12,476)
Tons processed 147,193 236,438 (89,245)
------------------ ----------------- -------
350,585 452,306 (101,721)
------------------ ----------------- -------
------------------ ----------------- -------


FIRST QUARTER RESULTS

Sales for the first quarter of 2007 decreased by $8.5 million, or 4.3%, to $187.2 million from $195.7 million for the first quarter of 2006.

Tons sold and processed in the first quarter of 2007 decreased by 101,721, or 22.5%, to 350,585 tons from 452,306 in the first quarter of 2006.

The gross margin for the first quarter of 2007 decreased to 18.6% from 21.6% for the first quarter of 2006.

Net income for the first quarter of 2007 decreased by $3.7 million, or 41.4%, to $5.2 million, or $0.50 per share, versus $8.8 million, or $0.87 per share ($0.85 after dilution), for the first quarter of 2006.

OPERATIONS

Business conditions during the Company's first quarter were weaker than originally anticipated. Demand for steel remained soft due to an ongoing industry-wide inventory correction by the service centers as well as weaker than expected end user demand in several manufacturing sectors. Weak automotive production adversely affected the volume of tons processed.

OUTLOOK

Management is expecting a stronger second quarter as seasonal factors and inventory replenishment lead to better customer demand. Recent announcements of price increases by the North American steel mills signal an end to the inventory correction and will likely lead to increases in both the Company's sales volume and gross margins. Import offers remain unattractively priced and imported steel is unlikely to have any impact on market conditions for the next two quarters.

COMPANY DESCRIPTION

Novamerican Steel Inc., based in Montreal, Canada with eleven operating locations in Canada and eleven operating locations in the United States, processes and distributes carbon steel, stainless steel and aluminum products, including carbon steel tubing for structural and automotive markets.

FORWARD-LOOKING (SAFE HARBOUR) STATEMENTS

Except for historical information contained herein, the matters set forth in this press release are forward-looking statements that involve risks and uncertainties including, but not limited to, product demand, competition, regulatory approvals, the effect of economic conditions and technological difficulties and other risks detailed in the Company's filings with the U.S. Securities and Exchange Commission.

Conference call: Friday March 30, 2007 at 9:00 am. Dial-in number: 1-800-525-6384




Novamerican Steel Inc. and Subsidiaries Consolidated Financial
Statements (unaudited)

CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

(in accordance with U.S. GAAP, in thousands of U.S. dollars, except
per share and tons data)


Three months ended
--------------------------------------------------------------------
February 24, February 25,
2007 2006
--------------------------------------------------------------------
$ $
Net sales 187,190 195,702
Cost of sales 152,303 153,348
--------------------------------------------------------------------
Gross margin 34,887 42,354
--------------------------------------------------------------------
Operating expenses
Plant 10,516 11,762
Delivery 5,846 6,335
Selling 3,553 3,480
Administrative and general 7,476 7,315
--------------------------------------------------------------------
27,391 28,892
--------------------------------------------------------------------
Operating income 7,496 13,462
--------------------------------------------------------------------
Interest expense 271 780
Other income (334) (427)
Share in income of a joint venture (2) (189)
--------------------------------------------------------------------
(65) 164
--------------------------------------------------------------------
Income before income taxes 7,561 13,298
Income taxes 2,383 4,455
--------------------------------------------------------------------
Net income 5,178 8,843
--------------------------------------------------------------------
Net income per share
Basic 0.50 0.87
--------------------------------------------------------------------
Diluted - 0.85
--------------------------------------------------------------------
Weighted average number of
shares outstanding 10,450,000 10,217,563
--------------------------------------------------------------------
Comprehensive income
Net income 5,178 8,843
Changes in cumulative translation
adjustment (2,082) 3,940
Change in fair value of interest rate swap,
net of deferred income taxes - 30
--------------------------------------------------------------------
3,096 12,813
--------------------------------------------------------------------
Tons sold 203,392 215,868
Tons processed 147,193 236,438
--------------------------------------------------------------------
350,585 452,306
--------------------------------------------------------------------



Novamerican Steel Inc. and Subsidiaries - Consolidated Financial
Statements (unaudited)

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

(in accordance with U.S. GAAP, in thousands of U.S. dollars, except
share data)

Accumu-
lated
Other Total
Common Shares Compre- Share-
------------------ Retained hensive holders'
Number Amount Earnings Income Equity
---------------------------------------------------------------------
$ $ $ $
Balance at
November 25, 2006 10,450,000 38,904 266,018 23,624 328,546
Options exercised
Net income 5,178 5,178
Changes in
cumulative
translation
adjustment - - - (2,082) (2,082)
---------------------------------------------------------------------
Balance at
February 24, 2007 10,450,000 38,904 271,196 21,542 331,642
---------------------------------------------------------------------
---------------------------------------------------------------------



Novamerican Steel Inc. and Subsidiaries - Consolidated Financial
Statements (unaudited)

CONSOLIDATED STATEMENT OF CASH FLOWS
(in accordance with U.S. GAAP, in thousands
of U.S. dollars)
-----------------------------------------------------------------------
February 24, February 25,
2007 2006
-----------------------------------------------------------------------
$ $
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 5,178 8,843
Adjustments to reconcile net income to
net cash from (used for) operating
activities
Depreciation and amortization 2,619 2,529
Share in income of a joint venture (2) (189)
Deferred income taxes (38) (516)
Gain on disposal of property, plant
and equipment (1) -
Changes in working capital items
Accounts receivable (3,377) 10,122
Income taxes receivable 21 2,361
Inventories (227) (15,311)
Prepaid expenses and other (752) (1,575)
Accounts payable and accrued liabilities 15,235 (9,823)
Income taxes payable (3,220) (1,004)
-----------------------------------------------------------------------
Net cash from (used for) operating
activities 15,436 (4,563)
-----------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Short term investment 36,837 17,305
Distribution from a joint venture - 260
Additions to property, plant and equipment (1,953) (4,881)
Proceeds from disposal of property, plant
and equipment 7 -
Other assets (16) (36)
-----------------------------------------------------------------------
Net cash from investing activities 34,875 12,648
-----------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in bank indebtedness 972 (342)
Issue of common shares - 4,113
Repayment on long-term debt (38,312) (108)
-----------------------------------------------------------------------
Net cash from (used for) financing
activities (37,340) 3,663
-----------------------------------------------------------------------
Effect of exchange rate changes on cash and
cash equivalents (295) 742
-----------------------------------------------------------------------
Net increase in cash and cash equivalents 12,676 12,490
Cash and cash equivalents, beginning of
period 31,016 47,805
-----------------------------------------------------------------------
Cash and cash equivalents, end of period 43,692 60,295
-----------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid 341 872
-----------------------------------------------------------------------
Income taxes paid 5,240 3,285
-----------------------------------------------------------------------



Novamerican Steel Inc. and Subsidiaries - Consolidated Financial
Statements (unaudited)

CONSOLIDATED BALANCE SHEETS
(in accordance with U.S. GAAP, in thousands of U.S. dollars)

February 24, February 25, November 25,
2007 2006 2006
---------------------------------------------------------------------
unaudited unaudited audited
$ $ $
ASSETS
Current assets
Cash and cash equivalents 43,692 60,295 31,016
Accounts receivable 112,051 114,757 109,609
Loan receivable - - 37,670
Income taxes receivable 1,555 347 -
Inventories 162,124 144,557 163,060
Prepaid expenses and other 2,851 3,051 2,096
Deferred income taxes 1,706 1,816 1,957
---------------------------------------------------------------------
323,979 324,823 345,408
---------------------------------------------------------------------
Investment in a joint venture 1,750 2,066 1,748
Property, plant and equipment 104,983 106,482 106,309
Goodwill 12,994 12,994 12,994
Deferred income taxes 2,053 1,875 2,260
Other assets 255 672 328
---------------------------------------------------------------------
446,014 448,912 469,047
---------------------------------------------------------------------
LIABILITIES
Current liabilities
Current portion of long-term
debt 432 3,089 38,642
Bank indebtedness 1,483 2,398 513
Trade accounts payable and
accrued liabilities 92,449 89,372 79,302
Trade accounts payable to a company
controlled by a director 909 964 677
Trade accounts payable to a joint
venture 702 1,282 592
Advances due to related
parties 189 162 192

Income taxes payable - - 1,703
Deferred income taxes 280 35 290
---------------------------------------------------------------------
96,444 97,302 121,911
---------------------------------------------------------------------
Long-term debt 2,498 41,764 2,645
Fair value of interest rate
swap - 20 -
Deferred income taxes 15,430 15,941 15,945
---------------------------------------------------------------------
114,372 155,027 140,501
---------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital 38,904 38,904 38,904
Retained earnings 271,196 230,563 266,018
Accumulated other
comprehensive income 21,542 24,418 23,624
---------------------------------------------------------------------
331,642 293,885 328,546
---------------------------------------------------------------------
446,014 448,912 469,047
---------------------------------------------------------------------


Contact Information

  • Novamerican Steel Inc.
    Lawrence P. Cannon, CA
    Vice President and Chief Financial Officer
    (514) 368-6455
    Website: www.novamerican.com