Polyphalt Reports its First Quarter Result
TSX Venture Exchange Symbol: PMA SEC Exempt: 82 4585 Issued/Outstanding: 34,315,792
TORONTO, May 9 -- Polyphalt Inc. is pleased to report results for the first quarter of operations, ended March 30, 2003. Polyphalt's revenues for the first quarter of the year were $1.5 million, an increase of $100,000 compared to the prior period. The Company reported a loss of $871,049 for the first quarter compared to a loss of $550,156 in the same period of 2002. The increase in the loss was mainly related to a lower 2003 licensing fee and royalties by $98,500 due to the timing difference and an increase in expenses of approximately $263,000. Factors that contributed to the increase in expenses include:
- One time gain due to reversal of a non-recurring accrual
in 2002 $ 100,000
- Foreign exchange gain in 2002 vs foreign exchange loss
in 2003 due to stronger Canadian dollars compared to
the US dollars $ 72,000
- One time legal fee relating to the loan offered by
Grandwin and increase in insurance costs due to the
tight insurance market after 911, etc. $ 91,000
On February 21, 2003, Polyphalt secured a loan facility of up to $4,000,000 from its majority shareholder, Grandwin Holdings Limited. The loan bears interest at the Canadian Imperial Bank of Commerce prime rate plus 1% to be paid monthly on the outstanding balance. In addition, Polyphalt is responsible for paying the applicable withholding taxes related to the interest payments to Grandwin. Proceeds from the loan will be used to meet Polyphalt's working capital requirements for 2003. As at the end of March 2003, $1,000,000 of the loan has already been drawn down.
A summary of financial performance for the period is provided in the Table below:
First Quarter Financial Highlights
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(Unaudited, stated in Canadian Dollars)
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Three Months Ended
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March 31, 2003 March 31, 2002
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Revenues 1,472,692 1,372,126
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Gross Margin 324,864 388,581
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Expenses 1,066,751 803,798
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EBITDA (741,887) (415,217)
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Profit/(Loss) for the Period (871,049) (550,156)
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Earnings/(Loss) for common share (0.03) (0.02)
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Certain of the prior year's figures were reclassified to confirm with the current year's financial statement presentation.
In 2003, Polyphalt restructured its business along market lines into Paving and Roofing Divisions.
For the Paving Division, revenue activities are typically lower in the first quarter reflecting the seasonality of asphalt paving. During the quarter, the Division continues to actively pursue new licensing agreements in Europe and North America and the sale of Polyblend(TM), a formulated polymeric modifier in powder form. As the market in North America becomes more mature in the PMA technologies, the ability to retain current licensees becomes more challenging. Polyphalt is currently considering different models to maximize the utilization of our technical capabilities to better serve our customers.
In March, one of Polyphalt's largest licensees (representing approximately 22% of Polyphalt's licensing and royalty revenue in 2002) provided the company with notice that it was terminating its agreement with the company, effective June, 2003. This termination will greatly affect the outlook of Polyphalt for 2003. Management is currently working with this licensee to review alternatives in order to continue the relationship. Polyphalt is also currently discussing with Grandwin whether or not the termination of this license constitutes an event of default under the loan agreement with Grandwin.
The results for the Roofing Division in the first quarter were encouraging with 2003 sales 19% stronger than 2002. The growth in sales revenue was both a direct result of an increase in prices instituted in December 2002 and a slow but steady improvement in the markets that the Roofing Division serves. The Division will continue to pursue new sales opportunities in the retail and contractor business in order to increase its capacity utilization. ISO registration is expected to complete in 2003 which will enhance the Division's focus in quality and continuous improvement.
While we are cautious regarding the outlook of the world economy and its impact on Polyphalt customers in 2003, Polyphalt is forecasting that through a blend of cost control, margin improvement and continued expansion, our bottom line performance will continue to improve.
Polyphalt is a publicly traded, Canadian based, technology company that develops and commercializes novel Polymer Modified Asphalt products and technology to serve North American and international infrastructure markets. Polyphalt has a broad portfolio of proprietary technologies, several of which combine blends of plastics and rubbers, including recycled materials. These processes help to produce cost-effective and longer-lasting pavements, roofing materials and other bituminous building and industrial products. Polyphalt's international license network comprises thirteen leading Asphalt refiners and suppliers throughout the United States, Canada, Australia, Europe and China. In February 2001, Polyphalt acquired GH International, a leading Canadian producer of roof coatings, adhesives and pavement maintenance products.
Polyphalt is a member of Cheung Kong Infrastructure group of companies. CKI is the largest publicly listed infrastructure company in Hong Kong with investment in power, infrastructure projects, infrastructure materials and infrastructure-related businesses. The company has operations in Hong Kong, mainland China, Australia, Canada and the Philippines.
Forward Looking Statements
This report may contain forward-looking statements that involve risk and uncertainties beyond the Company's ability to control or predict. Future results may differ materially from projected results depending on factors such as the economy, competition, changes in industry structure and alliances, reduced product demand, price volatility or other factors. Readers are cautioned not to place undue reliance on such forward-looking statements.