NEW YORK, May 16, 2016 /PRNewswire/ -- MFC Bancorp Ltd.
(NYSE: MFCB) (the "Company" or "MFC") announces its results for the
three months ended March 31, 2016 and
provides an update on its recent corporate developments. The
Company's financial statements are prepared in accordance with
International Financial Reporting Standards ("IFRS"). (All
references to dollar amounts are in Canadian dollars unless
otherwise stated.)
In the first quarter of 2016, revenues increased slightly to
$350.0 million from $349.6 million in the same period of 2015. We
continued to make progress in our plans to streamline our
operations, exiting certain low margin product lines, reducing
expenses and reducing working capital employed. This is an ongoing
process. However, we believe this is the basis to improve our
profitability and return on capital.
Despite a marginal increase in revenues, primarily as a result
of the positive impact of the weaker Canadian dollar against the
Euro in the period, our net income from continuing operations
attributable to shareholders for the first quarter of 2016 declined
to $0.4 million, or $0.01 per share on a basic and diluted
basis, from $5.4 million, or
$0.09 per share on a basic and
diluted basis, in the same period of 2015.
In the first three months of 2016, operating EBITDA from
continuing operations was $8.3
million, compared to $14.5
million in the same period 2015.
Operating EBITDA from continuing operations is defined as
earnings from continuing operations before interest, taxes,
depreciation, depletion, amortization and impairment. Operating
EBITDA from continuing operations is a non-IFRS financial measure
and should not be considered in isolation or as a substitute for
performance measures under IFRS. Management uses Operating EBITDA
from continuing operations as a measure of our operating results
and considers it to be a meaningful supplement to net income as a
performance measure, primarily because we incur depreciation and
depletion from time to time.
The following table provides a reconciliation of Operating
EBITDA to net income from continuing operations for the periods
indicated.
OPERATING EBITDA ($
in thousands)
|
March 31,
2016
|
March 31,
2015
|
Net income
(1)
|
$ 40
|
$ 5,759
|
Tax
expense
|
1,187
|
2,692
|
Finance
costs
|
4,316
|
4,787
|
Amortization,
depreciation and depletion
|
2,059
|
1,280
|
Operating EBITDA(2)
|
$ 8,302
|
$ 14,518
|
|
|
|
Note:
|
(1) Includes net
income from continuing operations attributable to non-controlling
interests.
|
|
(2) There were no
impairments for continuing operations in the three months ended
March 31, 2016 and 2015.
|
Financial Highlights
As of March 31, 2016, cash and
cash equivalents increased to $250.4
million from $197.5 million as
of December 31, 2015. We have made
progress in reducing our inventories. Inventories were $197.4 million as of March
31, 2016, compared to $245.3
million as of December 31,
2015. Trade receivables increased from $151.2 million as of December 31, 2015 to $207.9 million as of March
31, 2016. The increase in trade receivables was primarily as
a result of a reduction of inventories and an increase in strategic
receivables to enhance our realizations. Credit risk from
trade receivables is substantially mitigated through credit
insurance, bank guarantees, letters of credit and other risk
mitigation measures.
The following table highlights selected figures on our financial
position as of March 31, 2016 and
December 31, 2015:
FINANCIAL
POSITION
($ in thousands,
except ratios and per share
amounts)
|
March 31,
2016
|
December 31,
2015
|
Cash and cash
equivalents
|
$ 250,366
|
$ 197,519
|
Securities,
current
|
20,942
|
170
|
Trade
receivables
|
207,901
|
151,229
|
Inventories
|
197,406
|
245,345
|
Total current
assets
|
859,235
|
785,850
|
Total current
liabilities
|
524,475
|
414,562
|
Short-term bank
borrowings
|
207,457
|
60,103
|
Working
capital
|
334,760
|
371,288
|
Current
ratio(1)
|
1.64
|
1.90
|
Total
assets
|
1,055,859
|
977,351
|
Total long-term
debt
|
245,287
|
259,038
|
Total long-term
debt-to-equity(1)
|
0.47
|
0.47
|
Total
liabilities
|
707,479
|
608,151
|
Shareholders'
equity
|
346,174
|
367,192
|
Net book value per
share
|
5.48
|
5.81
|
|
|
|
Note:
(1)
|
The current ratio is
calculated as current assets divided by current liabilities and the
total long-term
debt-to-equity ratio
is calculated as total long-term debt divided by shareholders'
equity.
|
Credit Lines and Facilities with Banks
We established, utilized and maintain various kinds of credit
lines and facilities with banks and insurers. Most of these
facilities are short-term. These facilities are used in our
day-to-day finance and supply chain business. The amounts drawn
under such facilities fluctuate with the kind and level of
transactions being undertaken.
As at March 31, 2016, we had
credit facilities aggregating $812.3
million comprised of: (i) unsecured revolving credit
facilities aggregating $390.2 million
from banks. The banks generally charge an interest rate of
inter-bank rates plus an interest margin; (ii) revolving credit
facilities aggregating $105.2 million
from banks for structured solutions, a special trade financing. The
margin is negotiable when the facility is used; (iii) a
non-recourse specially structured factoring arrangement with a bank
for up to a credit limit of $244.5
million for our supply chain activities. We may factor
our receivable accounts upon invoicing at the inter-bank rate plus
a margin; (iv) foreign exchange credit facilities of $45.0 million with banks; and (v) secured
revolving credit facilities aggregating $27.4 million.
All of these facilities are either renewable on a yearly basis
or usable until further notice. A substantial portion of our credit
facilities are denominated in Euros and, accordingly, such amounts
may fluctuate when reported in Canadian dollars.
In addition, we have margin lines with availability at multiple
brokers, which can enable us to hedge approximately $129.7 million notional value.
Vision
Our vision is to become a regulated trade finance institution,
offering our customers and suppliers a wider range of structured
finance solutions including factoring, inventory financing,
forfaiting, marketing and other financing solutions.
There are significant opportunities to offer structured and
trade finance and banking solutions in the markets we serve as many
of our customers and suppliers do not have adequate financing
alternatives and could benefit from our services. Leveraging our
vertically-integrated supply chain platform, we have insights into
financing requirements across the value chain and the ability to
offer a full portfolio of structured and trade finance and banking
products will allow us to meet the needs of our business
partners.
In the first quarter of 2016, we made important progress towards
this goal by completing the acquisition of MFC Merchant Bank Ltd
(the "Bank"). As part of our group, the Bank does not engage in
retail banking and commercial banking, but instead provides
merchant banking and specialty banking services, focused on
structured and trade finance, to our customers, suppliers, and
group members, among others. The products that the Bank offers
include, among others:
- structured and trade finance, including advisory services, in
conjunction with export credit agencies;
- merchant banking products and services, with and without
recourse factoring;
- forfaiting;
- discounting of bills of exchange and promissory notes;
- purchase financing collateralized by the product;
- inventory financing collateralized by inventory and
- bank guarantees, letters of credit, documentary bank
guarantees/stand-by letters of credit, bills of exchange, bills of
lading, promissory notes and forwarders' certificate of receipt
facilities.
The Bank's customer deposits are mainly comprised of small and
medium sized corporate clients, who may also be trade and
structured finance customers, as well as our subsidiary companies
and other related entities. In addition, we integrate our existing
long-standing banking relationships with the Bank to support our
corporate vision.
Stakeholder Communication
Management welcomes any questions you may have and looks forward
to discussing our operations, results and plans with
stakeholders:
- Stakeholders are encouraged to read our entire management's
discussion and analysis for the three months ended March 31, 2016 and our unaudited financial
statements for the three months ended March
31, 2016, which are available for download under the
Company's profile at www.sec.gov or at www.sedar.com, for a greater
understanding of our business and operations.
- All stakeholders who have questions regarding the information
in this Quarterly Report may call our North American toll free
line: 1 (844) 331 3343 or International callers: +1 (604)
662 8873 to book a conference call with members of our senior
management. Questions may also be emailed to Rene Randall at rrandall@bmgmt.com.
Comments
Gerardo Cortina, President and
Chief Executive Officer of the Company, commented: "Historically,
we have operated in a net cash position; however, in 2014, after
the acquisitions of two leveraged companies, this situation
changed. We have implemented an action plan with the goal of
restoring our net cash position in 2016 by reducing inventories and
trade receivables and rationalizing other assets. In addition, the
action plan is expected to reduce our structural cost profile by
streamlining our businesses."
Mr. Cortina concluded: "We wish to thank all our stakeholders
and our banks for their support. We are making progress, but as of
today we are not satisfied with the results. We have a plan and a
vision. We will work diligently to execute them in order to enhance
value for our stakeholders."
About MFC
MFC is a finance and supply chain company, which facilitates the
working capital and other requirements of our customers and
suppliers. Our business activities involve customized
structured financial solutions and are supported by captive sources
and products secured by third parties. We do business in
multiple geographies and specialize in a wide range of industrial
products such as metals, minerals, steel products, and
ferro-alloys.
Disclaimer for
Forward‐Looking Information
This news release contains statements which are, or may be
deemed to be, "forward‐looking statements" which are
prospective in nature, including, without limitation, statements
regarding the Company's business plans, its strategy to reduce
trade receivables and inventories, the integration of the Bank,
future business prospects and any statements regarding beliefs,
expectations or intentions regarding the future.
Forward-looking statements are not based on historical facts,
but rather on current expectations and projections about future
events, and are therefore subject to risks and uncertainties which
could cause actual results to differ materially from the future
results expressed or implied by the forward-looking statements.
Often, but not always, forward-looking statements can be identified
by the use of forward-looking words such as "plans", "expects" or
"does not expect", "is expected", "scheduled", "estimates",
"forecasts", "projects", "intends", "anticipates" or "does
not anticipate", or "believes", or variations of such words and
phrases or statements that certain actions, events or results
"may", "could", "should", "would", "might" or "will" be taken,
occur or be achieved. Such statements are qualified in their
entirety by the inherent risks and uncertainties surrounding future
expectations. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause our
actual results, revenues, performance or achievements to be
materially different from any future results, performance or
achievements expressed or implied by the forward-looking
statements. Important factors that could cause our actual results,
revenues, performance or achievements to differ materially from our
expectations include, among other things:(i) periodic fluctuations
in financial results as a result of the nature of our business;
(ii) commodities price volatility; (iii) economic and market
conditions; (iv) competition in our business segments; (v) our
ability to enforce our rights, and recover expected amounts,
related to our insolvent customer through existing
collateral, guarantees, mortgages and other mitigation securities;
(vi) our ability to realize the anticipated benefits of our
acquisitions; (vii) additional risks and uncertainties resulting
from strategic investments, acquisitions or joint ventures; (viii)
counterparty risks related to our trading and finance activities;
(ix) our ability to execute, and the timing and amounts received as
a result of, our plan to rationalize certain hydrocarbon properties
and iron ore interests; (x) operating hazards; and (xi) other
factors beyond our control. Such forward-looking statements
should therefore be construed in light of such factors. Other than
in accordance with its legal or regulatory obligations, the Company
is not under any obligation and the Company expressly disclaims any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. Additional information about these and other
assumptions, risks and uncertainties are set out in our 2015 Annual
Report on Form 20-F filed with the U.S. Securities and Exchange
Commission and with the Canadian securities regulators and our
Management's Discussion and Analysis for the three months
ended March 31, 2016, filed with the Canadian securities
regulators.
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SOURCE MFC Bancorp Ltd.