Timminco Limited
TSX : TIM

Timminco Limited

November 11, 2008 16:30 ET

Timminco Reports Third Quarter 2008 Results

Quarter Marked by Continued Ramp-Up of Solar Grade Silicon Shipments

TORONTO, ONTARIO--(Marketwire - Nov. 11, 2008) - Timminco Limited ("Timminco" or the "Company")(TSX:TIM) announced its financial results for the third quarter ended September 30, 2008.

Highlights of the Third Quarter

- Shipped 300 metric tons of solar grade silicon, an increase of 36% over the second quarter output of 221 metric tons, at an average selling price of $53 per kilogram, generating revenue of $16 million.

- Sales were $69.0 million, an increase of 54.7% from $44.6 million in the third quarter of 2007.

- Earnings before interest, taxes, depreciation and amortization(1) (EBITDA) for the third quarter of 2008 was $6.9 million compared with an EBITDA loss of $2.0 million for the third quarter of 2007.

- EBITDA for the Silicon Group for the third quarter of 2008 was $8.8 million compared with $0.5 million for the third quarter of 2007.

- Net loss was $13.7 million or $0.13 per share compared with a net loss of $4.6 million or $0.05 per share for the third quarter of 2007.

- Adjusted net income(2) was $4.4 million.

- Received $33.3 million in deposits from solar grade silicon customers under long-term contracts.

- Signed an agreement to supply approximately 1,150 metric tons of solar grade silicon through December 2009 with a leading global manufacturer of wafers for the solar photovoltaic energy industry.

- Confirmed an extension of a supply agreement with Q-Cells AG for 2010 to 2013 with deliveries of 6,000 metric tons per year.

- Continued the expansion of its solar grade silicon production facility in
Becancour, Quebec toward an annual production capacity of 14,400 metric tons.

- Recorded an asset impairment charge of $13.8 million relating to its investment in Fundo Wheels AS, reflecting the poor economic conditions and outlook for the European automotive industry.

Highlights Subsequent to Quarter End

- Amended its credit agreement with the Bank of America, N.A. to increase the maximum revolving credit line to US$50.0 million from US$32.8 million.

"Our third quarter results demonstrate the progress we are making toward our goal to become a leading supplier of solar grade silicon to the solar photovoltaic energy industry," said Dr. Heinz Schimmelbusch, Chairman of the Board and Chief Executive Officer of Timminco. "During the quarter, we resolved a number of challenges related to the ramp up of initial production on the first three production lines, resulting in an increase in solar grade silicon production to 342 metric tons. Solar grade silicon shipments for the quarter grew to 300 metric tons, generating revenue of approximately $16 million. In addition, the expansion of our annual production capacity to 14,400 metric tons is progressing well with our fourth production line having been commissioned in the final week of October 2008. Based on this new production capacity coming on stream and continuing increase in productivity on the initial three production lines through planned process improvements, we expect to ship volume in the range of 1,200 to 1,500 metric tons of solar grade silicon in 2008."

Financial Results

Timminco has two reporting segments: the Silicon Group, which includes the silicon metal and solar grade silicon product lines and the Magnesium Group, which includes the magnesium extrusion and fabrication and specialty metals product lines. Timminco also has a minority investment in Fundo Wheels AS, an aluminum wheels business based in Norway.

Sales for the third quarter of 2008 were $69.0 million, an increase of 54.7% from $44.6 million for the same period of 2007. Sales for the first nine months of 2008 were $179.8 million, an increase of 38.6% from $129.7 million for the same period of 2007. The growth is attributable to higher sales of the Company's solar grade silicon and silicon metal products.

EBITDA for the third quarter of 2008 was $6.9 million compared with an EBITDA loss of $2.0 million for the third quarter of 2007. EBITDA for the nine months ended September 30, 2008 was $14.9 million compared with an EBITDA loss of $1.7 million for nine months ended September 30, 2007.

Net loss for the third quarter was $13.7 million, or $0.13 per share, compared to a net loss of $4.6 million, or $0.05 per share, for the third quarter of 2007. The higher loss is the result of a reorganization charge relating to the closure of the Company's Haley, Ontario manufacturing facility and an asset impairment charge relating to the Company's investment in Fundo Wheels. Excluding restructuring costs, impairment charges, and the equity in the loss of Fundo Wheels, adjusted net income for the third quarter of 2008 was $4.4 million.

Net loss for the first nine months of 2008 was $21.3 million or $0.20 per share compared with a net loss of $9.2 million or $0.11 per share for the first nine months of 2007. Excluding the aforementioned restructuring costs, impairment charges, and the equity in the loss of Fundo Wheels, adjusted net income for the nine months ended September 30, 2008 was $8.5 million.

During the third quarter, the Company invested $20.1 million to support the next phase expansion of its solar grade silicon manufacturing facility to 14,400 metric tons of annual production. For the nine months ended September 30, 2008, Timminco invested $51.6 million in capital expenditures, of which $46.7 million was directed towards the expansion of the solar grade silicon production facility.

Cash and short-term investments as at September 30, 2008 were $2.5 million, compared to $19.5 million at December 31, 2007. The Company received deposits of $33.3 million in the third quarter and an additional $4.2 million subsequent to the end of quarter from customers under solar grade silicon supply contracts. At September 30, 2008, the Company had funds available to it through its revolving credit facility of US$8.1 million. Subsequent to the end of the third quarter, the Company announced that its credit agreement with the Bank of America has been amended to increase the maximum revolving credit line to US$50.0 million from US$32.8 million. Had this increase in the credit line been in place on September 30, 2008, the availability under the facility would have increased to approximately US$25.3 million.

The Company believes it will have sufficient liquidity to finance its capital expansion plans and working capital needs, based on its revolving credit facility, expected additional solar grade silicon customer deposits, expected cash flow from operations and cash on hand.

Silicon Group

Sales of the Silicon Group for the third quarter were $51.2 million, an increase of 70% from $30.0 million for the third quarter of 2007. For the nine months ended September 30, 2008, sales for the Silicon Group were $130.9 million, an increase of 65% from $79.4 million for the same period of 2007. The growth was due to an increase in the sales of solar grade silicon and a higher average selling price for silicon metal.

The Silicon Group shipped 300 metric tons of solar grade silicon in the third quarter, an increase of 36% from 221 metric tons shipped in the second quarter of 2008, generating revenue of $16 million. The Company continued to ramp-up production in the quarter and resolved a number of start-up production issues.

Gross profit for the third quarter of 2008 was $10.1 million, or 19.8% of sales, compared with gross profit of $0.9 million, or 3.1 % of sales, for 2007. Gross margin for the solar grade silicon product was 42%. Gross profit for the nine months ended September 30, 2008 was $24.7 million, or 18.9 % of sales, compared with a gross profit of $3.6 million, or 4.6% of sales, for the nine months ended September 30. The increase was due to higher sales of solar grade silicon, as well as a higher average selling price for silicon metal in the third quarter of 2008.

EBITDA for the third quarter of 2008 was $8.8 million compared with $0.5 million for the third quarter of 2007. EBITDA for the nine months ended September 30, 2008 was $20.4 million compared with $3.7 million for nine months ended September 30, 2007.

Magnesium Group

Sales of the Magnesium Group were $17.8 million in the third quarter of 2008, an increase of 22.5% from $14.5 million for the third quarter of 2007. For the nine months ended September 30, 2008, sales were $48.9 million compared with $50.3 million for the nine months ended September 30, 2007, representing a decrease of 2.8%.

Gross profit for the third quarter was $3.4 million, or 18.8% of sales. This compares to $2.2 million or 14.8% of sales in the third quarter of 2007. Gross profit for the nine months ended September 30, 2008 was $6.8 million, or 13.8% of sales, compared with gross profit of $5.5 million, or 10.9% of sales, for the nine months ended September 30, 2007.

EBITDA for the third quarter of 2008 was $0.1 million compared with an EBITDA loss of $0.7 million for the third quarter of 2007. EBITDA for the nine months ended September 30, 2008 was $0.3 million compared with an EBITDA loss of $0.9 million for the nine months ended September 30, 2007.



Financial Highlights

Three Months Ended Nine Months Ended
(unaudited) (unaudited)
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
(000s) 2008 2007 2008 2007
Sales $68,990 44,560 $179,835 $129,717

Gross profit 13,465 3,095 31,440 9,094

Gross profit percentage 19.5% 6.9% 17.5% 7.0%

EBITDA 6,889 (2,004) 14,856 (1,652)

Net loss (13,727) (4,579) (21,331) (9,200)
Loss per common share, basic
and diluted (0.13) (0.05) (0.20) (0.11)
Working capital (excluding
available cash items) 51,756 23,681 51,756 23,681
Total assets 242,547 186,865 242,547 186,865
Cash and marketable
securities 2,525 60,926 2,525 60,926
Bank debt 24,349 327 24,349 327
Total long term liabilities 48,594 22,673 48,594 22,673
Weighted average number of
Common shares outstanding,
basic and diluted 104,147 93,932 104,076 85,396


Timminco's consolidated financial statements for the quarter ended September, 2008 and related management's discussion and analysis (MD&A) will be posted on its website, www.timminco.com, later today and filed with securities regulatory authorities and available through SEDAR at www.sedar.com.

Conference Call

Timminco will host a conference call today (Tuesday, November 11, 2008) at 5:00 pm ET to discuss its third quarter fiscal 2008 results. To access the conference call by telephone, dial 416-644-3420 or 1-800-731-5319. Please connect approximately five minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay until Tuesday, November 18, 2008 at midnight. To access the archived conference call, dial 416-640-1917 or 1-877-289-8525 and enter the reservation number 21287753#. A live audio webcast of the conference call will be available at www.timminco.com. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above web site for 30 days.

Notice on Photon Report

Timminco will be removing from its website the Photon Consulting Operational Review Report on Becancour Silicon Inc. and the related document describing the material factors or assumptions underlying certain forward-looking information contained in such report, which were posted on May 14 and August 12, 2008, respectively (the "Photon Report"). Timminco originally commissioned the Photon Report to support due diligence efforts for strategic discussions beyond normal supplier-customer relationships and made it publicly available to enhance the investing public's understanding of the potential future performance for Timminco's solar grade silicon product line. However, in light of changes over the past six months resulting from on-going discussions with solar grade silicon customers, experience gained from operating the new three-line facility and modifications to the purification equipment and processes, as well as significant economic uncertainties resulting from the recent global financial crises, Timminco believes that some of the material factors or assumptions originally used to develop the forward-looking information in the Photon Report, including in respect of revenues, production volumes and costs, may no longer be valid. To avoid any misunderstanding of Timminco's views on its future performance, the forward-looking information in the Photon Report has been withdrawn.

About Timminco

Timminco is a leader in the production and marketing of lightweight metals, specializing in solar grade silicon for the rapidly growing solar photovoltaic energy industry. Using its proprietary technology, Timminco processes metallurgical grade silicon into low cost solar grade silicon for use in the manufacture of solar cells. Timminco also produces silicon metal, magnesium extrusions and other specialty metals for use in a broad range of industrial applications serving the aluminum, chemical, pharmaceutical, electronics and automotive industries.

CAUTIONARY NOTE ON FORWARD-LOOKING INFORMATION

This news release contains "forward-looking information", as such term is defined in applicable Canadian securities legislation, concerning Timminco's future financial or operating performance and other statements that express management's expectations or estimates of future developments, circumstances or results. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "expects", "believes", "anticipates", "budget", "scheduled", "estimates", "forecasts", "intends", "plans" and variations of such words and phrases, or by statements that certain actions, events or results "may", "will", "could", "would" or "might" "be taken", "occur" or "be achieved". In this news release, such information includes statements regarding supply commitments, projected output for the current year, future production capacity, liquidity and capital resources for capital expansion and working capital for Timminco's solar grade silicon product line.

Forward-looking information is based on a number of assumptions and estimates that, while considered reasonable by management based on the business and markets in which Timminco operates, are inherently subject to significant operational, economic and competitive uncertainties and contingencies. Timminco cautions that forward-looking information involves known and unknown risks, uncertainties and other factors that may cause Timminco's actual results, performance or achievements to be materially different from those expressed or implied by such information, including, but not limited to: limited history with solar grade silicon production; expansion of solar grade silicon production and sales; production capacity expansion at the Becancour facilities; protection of intellectual property rights; increasing and maintaining the purity of solar grade silicon; long-term contracts for supplying solar grade silicon; selling prices for solar grade silicon; price volatility for silicon metal; pricing and availability of raw materials for silicon metal and solar grade silicon production; dependence upon power supply for silicon metal production; cost of solar grade silicon production; price volatility for magnesium metal; magnesium supply chain interruptions; dependence upon key customers of magnesium extruded and fabricated products; manufacturing cost reduction initiatives; financing requirements for capital expenditures; limitations under existing credit facilities; foreign currency exchange; dependence upon key executives and employees; customer concentration; completion and integration of potential acquisitions, partnerships or joint ventures; risks with foreign operations and suppliers; environmental, health and safety laws and liabilities; equipment failures; transportation disruptions; conflicts of interest; intellectual property infringement claims; new regulatory requirements; labour disputes; and changes in tax laws. These factors are discussed in greater detail in Timminco's Annual Information Form for the year ended December 31, 2007, which is available via the SEDAR website at www.sedar.com. Although Timminco has attempted to identify important factors that could cause actual results, performance or achievements to differ materially from those contained in forward-looking information, there can be other factors that cause results, performance or achievements not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate or that management's expectations or estimates of future developments, circumstances or results will materialize. Accordingly, readers should not place undue reliance on forward-looking information. The forward-looking information in this news release is made as of the date of this news release and Timminco disclaims any intention or obligation to update or revise such information, except as required by applicable law.

(1) EBITDA is not a recognized measure under Canadian generally accepted accounting principles (GAAP), however, management believes that it is a useful performance measure as it approximates cash generated from operations, before capital expenditures and changes in working capital and excludes unusual items.

(2) Adjusted net income is not a recognized measure under Canadian Generally Accepted Accounting Principles (GAAP), however, management believes that in addition to net income (loss), adjusted net income is a useful supplemental measure as it provides investors with an indication of the ongoing profits generated on products sold to customers after corporate overhead expenses. Management defines adjusted net income as net income before income taxes, impairment of investment in Fundo Wheels, equity in the loss of Fundo Wheels, gain on sale of property, plant and equipment and reorganization costs.

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