Royal Group advises of challenging business conditions in second quarter & announces plan to enhance performance and shareholder
July 15 2005 - 8:00AM
PR Newswire (US)
Royal Group advises of challenging business conditions in second
quarter & announces plan to enhance performance and shareholder
value TORONTO, July 15 /PRNewswire-FirstCall/ -- Royal Group
Technologies Limited (RYG-TSX; RYG-NYSE) today advised that its
consolidated sales were less than it expected during the second
quarter, partly as a result of inclement weather conditions early
in the quarter. In addition, Royal advised that its gross margins
continue to be under pressure from higher raw material costs. The
Company expects second quarter earnings per share to be
substantially below earnings per share of $0.38 reported for the
comparable quarter in the previous year. Royal Group will report
its second quarter financial results on August 12, 2005. Looking
forward, the Board wants Royal Group to be prepared for either the
sale of the Company, or its continuation as a public entity should
a fair offer not result from the previously announced sale process.
Therefore, the Board has approved a four-part management plan aimed
at improving financial performance, and identifying the
appreciation in values of certain assets. The plan contains the
following elements: - Business unit portfolio restructuring,
involving identification of measures to create value from non-core
operations, and actions to recast or divest of non-performing
operations; - Actions to identify and quantify cost and margin
opportunities, divisionally and across the enterprise; - Enhancing
the full potential of core businesses through development of a
strategic plan by September 2005; and, - Exploration of options to
refinance the Company, which include the recognition of the value
imbedded in real estate. To assist with the first three elements of
management's plan, a premiere global strategy consulting firm has
been retained. Royal Group envisions the consulting firm's
participation to span six months. They will also assist with
development of plans to improve the Company's information and
reporting systems. To address the Company's inefficient capital
structure and to improve its liquidity position, various
refinancing alternatives are being explored, including possible
monetization of Royal Group's extensive industrial real estate
portfolio. RBC Capital Markets Real Estate Group has been retained
to evaluate options for the possible monetization of Royal Group's
extensive real estate holdings, in the context of the prevailing
strong market for industrial and commercial buildings.
PricewaterhouseCoopers is also assisting the Company in evaluating
the real estate options, including potential tax implications.
Royal Group's Board intends to meet as needed during the summer to
review actions recommended by management within the foregoing
framework, and make timely decisions related thereto. The Company
will announce any major decisions taken and their anticipated
impact on financial results. Any actions taken will be intended to
enhance shareholder value, whether the Company is sold or continues
as a public entity. Lawrence J. Blanford, who was appointed
President and CEO of Royal Group on May 24, 2005, commented on his
Management team's evolving plans saying, "we are beginning to make
the difficult decisions necessary to deal with our tough business
situation, by targeting our plans at improving profit margins,
reducing invested capital and providing greater strategic focus to
the organization." Mr. Blanford concluded saying, "we intend to
implement our plans to create value with a sense of urgency,
working to build the confidence of customers, suppliers, employees
and financial stakeholders". The company will host a conference
call pertaining to its financial results at 10:00 AM on August 12,
which will be webcast simultaneously and in its entirety. The
webcast can be accessed though the company's web site at
http://www.royalgrouptech.com/. Royal Group Technologies is a
manufacturer of innovative, polymer-based home improvement,
consumer, and construction products. The company has extensive
vertical integration, with operations dedicated to provision of
materials, machinery, tooling, real estate, and transportation
services to its plants producing finished products. Royal's
manufacturing facilities are primarily located throughout North
America, with international operations in South America, Europe,
and Asia. Additional investment information is available on Royal
Group's web site at http://www.royalgrouptech.com/ under the
"Investor Relations" section. The information in this document
contains certain forward-looking statements with respect to Royal
Group Technologies Limited, its subsidiaries and affiliates. These
statements are often, but not always made through the use of words
or phrases such as "expect", "should continue", "continue",
"believe", "anticipate", "estimate", "contemplate", "target",
"plan", "budget", "may", "will", "schedule" and "intend" or similar
formulations. By their nature, these forward-looking statements are
necessarily based upon a number of estimates and assumptions that,
while considered reasonable by management, are inherently subject
to significant, known and unknown, business, economic, competitive
and other risks, uncertainties and other factors affecting Royal
specifically or its industry generally that could cause actual
performance, achievements and financial results to differ
materially from those contemplated by the forward-looking
statements. These risks and uncertainties include the ongoing
shareholder value maximization process and its outcome; the outcome
of the ongoing internal review and investigations by the Special
Committee of the Board of Directors; fluctuations in the level of
renovation, remodeling and construction activity; changes in
product costs and pricing; an inability to achieve or delays in
achieving savings related to the cost reductions or increases in
revenues related to sales price increases; the sufficiency of our
restructuring activities, including the potential for higher actual
costs to be incurred in connection with restructuring activities
compared to the estimated costs of such actions; the ability to
recruit and retain qualified employees; the level of outstanding
debt and our current debt ratings; the ability to meet the
financial covenants in our credit facilities; changes in product
mix; the growth rate of the markets into which Royal's products are
sold; market acceptance and demand for Royal's products; changes in
availability or prices for raw materials; pricing pressures
resulting from competition; difficulty in developing and
introducing new products; failure to penetrate new markets
effectively; the effect on foreign operations of currency
fluctuations, tariffs, nationalization, exchange controls,
limitations on foreign investment in local business and other
political, economic and regulatory risks; difficulty in preserving
proprietary technology; adverse resolution of any litigation,
investigations, administrative and regulatory matters, intellectual
property disputes, or similar matters; changes in securities or
environmental laws, rules and regulations; currency risk exposure
and other risks described from time to time in publicly filed
disclosure documents and securities commission reports of Royal
Group Technologies Limited and its subsidiaries and affiliates. In
view of these uncertainties we caution readers not to place undue
reliance on these forward-looking statements. Statements made in
this document are made as of July 15, 2005 and Royal disclaims any
intention or obligation to update or revise any statements made
herein, whether as a result of new information, future events or
otherwise. DATASOURCE: Royal Group Technologies Limited CONTACT:
Mark Badger, Vice President of Marketing and Corporate
Communications, Royal Group Technologies Limited, Phone (905)
264-0701
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