TORONTO--(BUSINESS WIRE )--ABC Technologies Holdings Inc. (TSX: ABCT) (“ABC Technologies”, “ABC”, or the “Company”), a leading manufacturer and supplier of custom, highly engineered, technical plastics and lightweighting innovations to the North American light vehicle industry, today announced results for the three months and fiscal year ended June 30, 2022 (“Q4 Fiscal 2022” and “Fiscal 2022”, respectively) and has declared a quarterly cash dividend of C$0.0375 per share. All amounts are shown in United States Dollars (“$”), unless otherwise noted.
Please click HERE for ABC’s Q4 Fiscal 2022 and Fiscal Year 2022 Management’s Discussion and Analysis (“MD&A”) or refer to the Company’s Audited Consolidated Financial Statements and MD&A for the year ended June 30, 2022 available on the Company’s profile at www.SEDAR.com and on the Company website.
ABC Technologies’ newly appointed President and Chief Executive Officer, Terry Campbell, commented: “I’m excited to be joining ABC at a pivotal time in its journey. With a macro environment that is still volatile due to the ongoing supply chain and semiconductor availability issues affecting our OEM customers, two recent acquisitions and an active M&A pipeline as well as a core business that is competing and winning in the market, but faces the same challenges as many of our peers, I see an amazing amount of opportunity in front of everyone at ABC. We have some work ahead of us to further adapt to this new normal in the production environment and return ABC’s financial results to target levels, but these are challenges I’ve seen many times before and successfully led organizations through in the past. We’ve got a strong and capable team here at ABC and I have no doubt we can return to, and even exceed, the results seen prior to the onset of the semiconductor crisis.”
Q4 Fiscal 2022 Results of Operations
Sales were $319.2 million in Q4 Fiscal 2022 compared with $233.2 million in Q4 Fiscal 2021, an increase of $86.1 million or 36.9%. Of this increase, $52.3 million is attributable to acquisitions accounting for 59.4% of the overall increase. According to IHS Markit reports, industry production in North America increased by 11.7% in Q4 Fiscal 2022 compared to Q4 Fiscal 2021. The Company enjoyed better than industry growth as a result of improved sales to a number of significant customers due to its product mix relative to the industry.
Cost of sales was $291.5 million in Q4 Fiscal 2022 compared with $200.7 million in Q4 Fiscal 2021, an increase of $90.8 million or 45.3%, of which $47.2 million or 52.0% is attributable to acquisitions. As a percentage of sales, cost of sales was 91.3% in Q4 Fiscal 2022 compared with 86.1% in Q4 Fiscal 2021. Gross margin in Q4 Fiscal 2022 was lower than the comparable prior year quarter resulting from higher labor and freight costs, and increased raw material costs, primarily resin, glass, rubber, paint and steel.
Selling, general and administrative expenses were $44.1 million in Q4 Fiscal 2022 compared with $36.3 million in Q4 Fiscal 2021, an increase of $7.8 million or 21.4%. As a percentage of sales, selling, general and administrative expenses were 13.8% in Q4 Fiscal 2022 compared with 15.6% in Q4 Fiscal 2021.
Significant differences quarter over quarter include:
Net loss was $13.6 million in Q4 Fiscal 2022 compared with $11.7 million in Q4 Fiscal 2021, an increase of $1.9 million or 15.8%. Primary contributors to the change between periods are a $4.8 million decrease in gross profit in Q4 Fiscal 2022 due to higher costs, $7.8 million due to higher selling general and administration costs, an $8.2 million impairment charge, $1.7 million from improved joint venture performance and a $18.5 million swing to income tax recovery from expense.
Adjusted EBITDA was $15.2 million in Q4 Fiscal 2022 compared with $26.9 million in Q4 Fiscal 2021, a decrease of $11.7 million or 43.4%, primarily resulting from a higher operating loss due to the reasons described above.
Adjusted Free Cash Flow1 was $17.7 million higher for Q4 Fiscal 2022 compared with Q4 Fiscal 2021 primarily due to higher net cash flows from operating activities of $30.1 million offset by higher purchases of property plant and equipment and additions to intangible assets of $1.9 million and $2.7 million respectively and lower one-time advisory, bonus and other costs of $8.1 million.
Sales were $971.9 million for Fiscal Year 2022 compared with $970.9 million for Fiscal 2021, an increase of $1.0 million or 0.1%. Excluding $71.2 million in sales attributable to acquisitions in the year, sales were 7.0% lower than the prior year. According to IHS Markit reports, industry production in North America decreased by 8.9% in Fiscal 2022 compared to Fiscal 2021. Lost production due to OEM plant closures driven by semiconductor shortages resulted in a significant decrease in revenue compared to the prior year where production had approached near normal production levels after the initial COVID-19 lockdowns that had occurred in the period from March 2020 to May 2020.
Cost of sales was $889.4 million for Fiscal 2022 compared with $811.3 million for Fiscal 2021, an increase of $78.0 million or 9.6%. As a percentage of sales, cost of sales was 91.5% for Fiscal 2022 compared with 83.6% for Fiscal 2021. Gross margin in Fiscal 2022 is lower resulting from higher labor and freight costs, increased raw material costs, primarily resin, glass, rubber, paint and steel, and from inefficiencies due to frequent plant closures by OEMs. Fiscal 2021 enjoyed the benefit of $10.2 million in Canada Emergency Wage Subsidy ("CEWS") payments reducing wage expense in the period, which was also partially offset by the increased costs around managing COVID-19 effects in the same period, versus Fiscal 2022 where the Company was ineligible to receive CEWS.
Selling, general and administrative expenses were $131.0 million for Fiscal 2022 compared with $132.1 million for Fiscal 2021. As a percentage of sales, selling, general and administrative expenses were 13.5% for Fiscal 2022 compared with 13.6% for Fiscal 2021.
Significant differences year over year include:
Net loss was $64.5 million for Fiscal 2022 compared with $11.7 million for Fiscal 2021, an increase of $52.9 million. Primary contributors to the change between years is a $77.0 million reduction in gross margin in Fiscal 2022 due to the combination of lower revenue as a result of lower OEM production largely caused by semiconductor shortages, higher raw material costs primarily attributable to increased resin, glass, rubber, paint, and steel costs as well as higher labor and freight costs, and inefficient plant operations caused by short notification by OEMs of their own plant closures, $8.2 million for the impairment of non-financial assets, and $5.2 million due to lower income from joint ventures, largely offset by a favorable $1.2 million reduction in selling, general and administration expenses, $14.8 million due to lower interest expense and $22.9 million lower tax expense.
Adjusted EBITDA was $45.7 million for Fiscal 2022 compared with $133.4 million for Fiscal 2021, a decrease of $87.7 million or 65.8%, primarily as a result of higher operating loss due to the reasons described above.
Adjusted Free Cash Flow was $125.5 million lower for Fiscal 2022 compared with Fiscal 2021 primarily due to lower net cash flows from operating activities of $88.5 million, higher purchases of property plant and equipment and additions to intangible assets of $7.9 million and $5.4 million respectively, lower dividends received from joint ventures of $5.2 million, lower one-time advisory, bonus and other costs of $8.0 million. Fiscal 2021 results were positively impacted by working capital normalization following the first wave of COVID-19.
The Company's financial results during the last half of Fiscal 2021 and Fiscal 2022 have been significantly impacted by disruptions and shortages in the supply of critical components and materials globally, particularly semiconductors, which were indirect outcomes of the COVID-19 pandemic. When the COVID-19 pandemic caused a significant drop in vehicle sales in spring 2020, OEMs cut their orders of all parts and materials, including the semiconductors needed for functions ranging from touchscreen displays to collision-avoidance systems. In the fall of 2020, when demand for passenger vehicles rebounded, OEMs were not able to secure adequate supply of semiconductors as chip manufacturers were already committed to supplying other customers in consumer electronics. The global semiconductor shortage resulted in temporary shutdowns or slowdowns of the production lines at the majority of our OEM customers beginning in February and March 2021, which impacted the production levels in our plants that supply those customers. In Fiscal 2022, primarily Q1 and Q2, COVID-19 had a more direct effect on operations. Outbreaks in major semiconductor manufacturing countries, such as Malaysia, resulted in the temporary shutdown of the manufacturing sector in the countries. As a result, the lost production exacerbated the shortage of semiconductors, leading to increased shutdowns by nearly all OEMs. These shutdowns, frequently with very short notice, resulted in inefficiencies at the Company’s production facilities. In Q3 and Q4 Fiscal 2022, supply chain disruptions to OEM customers abated to some extent, but not completely. Supply chain disruptions and economic conditions, which include the conflict between Russia and Ukraine and increasing global inflationary rates and increasing interest rates, have resulted, among other things, price increases and higher costs in respect of, but not limited to, labor, freight, utilities, resin, glass, rubber, paint and steel.
The Board of Directors today has declared a Q4 Fiscal 2022 quarterly cash dividend of C$0.0375 per share, payable on or about October 31, 2022 to shareholders of record on September 30, 2022.
ABC will host a conference call today, September 2, 2022 at 8:30am ET to discuss the results. Participants may listen to the call via audio streaming at www.abctechnologies.com/investors.
The dial-in number to participate in the call is: Toll Free: 1-855-327-6837 Toll/International: 1-631-891-4304
A telephonic replay will be available approximately two hours after the call. The replay will be available until 11:59pm ET on Friday, September 16th, 2022.
Replay Information: Toll Free: 1-844-512-2921 Toll/International: 1-412-317-6671 Replay Pin Number: 10020056
A webcast replay will be available approximately one hour after the conclusion of the call at www.abctechnologies.com/investors under the Events & Presentations section.
Non-IFRS Measures and Key Indicators
This press release uses certain non-IFRS financial measures and ratios. Management uses these non-IFRS financial measures for purposes of comparison to prior periods, to prepare annual operating budgets, and for the development of future projections and earnings growth prospects. This information is also used by management to measure the profitability of ongoing operations and in analyzing our financial condition, business performance and trends. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. We use non-IFRS financial measures including EBITDA, Adjusted EBITDA, and Adjusted Free Cash Flow to provide supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when using IFRS financial measures. We believe that the presentation of these financial measures enhances an investor’s understanding of our financial performance as these measures are widely used by investors, securities analysts and other interested parties.
“EBITDA” means net earnings (loss) before interest expense, income tax expense (recovery), depreciation of property, plant and equipment, depreciation of right-of-use assets, and amortization of intangible assets.
“Adjusted EBITDA” means EBITDA plus: loss on disposal and write-down of assets, unrealized loss (gain) on derivative financial instruments, transactional, recruitment, and other bonuses, acquisitions related cost, initial public offering related costs, business transformation and related costs (which may include severance and restructuring expenses), impairment of non-financial assets, Apollo transaction cost less: our share of income of joint ventures, plus the Company’s proportionate share of the EBITDA generated by our joint ventures, bargain purchase gain on the acquisition, and share-based compensation expense. We also present Adjusted EBITDA excluding the impact of IFRS 16 by charging the lease payments applicable to those periods to expense as was the case prior to IFRS 16 – Leases (“IFRS 16”).
“Adjusted Free Cash Flow” means Net Cash Flows from Operating Activities less: purchases of property, plant and equipment, additions to intangible assets, lease payments, net impact of hedge monetization, plus: proceeds from disposal of property, plant, and equipment, cash dividends received from joint ventures, and one-time advisory, bonus and other costs.
Additional information about the Company, including the Company’s Management Discussion and Analysis of Operating Results and Financial Position for the three months and fiscal year ended June 30, 2022 and the Company’s consolidated financial statements for the fiscal year ended June 30, 2022 can be found at www.sedar.com.
Fiscal 2022 Financial Results (Expressed in thousands of United States dollars, unless otherwise specified)
ABC Technologies Holdings Inc. (previously ABC Group Holdings Parent Inc.)
Consolidated Statement of Financial Position
Accrued liabilities and other payables
Current portion of lease liabilities
Foreign currency translation reserve and other
Cash flow hedge reserve, including cost of hedging
ABC Technologies Holdings Inc. (previously ABC Group Holdings Parent Inc.)
Consolidated Statement of Comprehensive Income (Loss)
For the year ended June 30,
Loss on disposal and write-down of assets
Gain on derivative financial instruments
Share of income of joint ventures
Total income tax expense (recovery)
Items that may be recycled subsequently to net earnings (loss):
Foreign currency translation of foreign operations and other
Cash flow hedges, net of tax expense of $844 (2021: $8,744)
Cash flow hedges recycled to net earnings, net of tax expense of $578 (2021: $974)
Total comprehensive income (loss) for the period
Earnings (loss) per share - basic and diluted
ABC Technologies Holdings Inc. (previously ABC Group Holdings Parent Inc.)
Consolidated Statement of Cash Flows
For the three months ended June 30,
For the year ended June 30,
Reconciliation of Net loss to Adjusted EBITDA
Depreciation of property, plant and equipment
Loss on disposal and write-down of assets
Unrealized loss (gain) on derivative financial instruments
Transactional, recruitment and other bonuses1
Share of loss (income) of joint ventures
Initial public offering ("IPO") related costs4
Lease payments, net of sublease receipts
Reconciliation of net cash flows from (used in) operating activities to Adjusted Free Cash Flow
For the three months ended June 30,
For the year ended June 30,
Reconciliation of net cash flows from operating activities to Adjusted Free Cash Flow
Net cash flows from operating activities
Purchases of property, plant and equipment
Proceeds from disposals of property, plant and equipment
Principal payments of lease liabilities
Dividends received from joint ventures
One-time advisory, bonus and other costs2
Net impact of hedge monetization
Some of the information contained in this news release may constitute forward-looking information or contain statements expressing such forward-looking information ("forward-looking statements" and collectively with the forward-looking information expressed thereby, "forward-looking information"). We use words such as "may", "would", "could", "should", "will", "unlikely", "expect", "anticipate", "believe", "intend", "planning", "forecast", "outlook", "projection", "estimate", "target" and similar expressions suggesting future outcomes or events to identify forward-looking information.
Forward-looking information contained herein is based on management’s reasonable assumptions and beliefs in light of the information currently available to us and is presented as of the date hereof. Such forward-looking information is intended to provide information about management's current expectations and plans and may not be appropriate for other purposes. While we believe we have a reasonable basis for presenting such forward-looking information, any forward-looking statements expressing it are not a guarantee of future performance or outcomes. Whether actual results and developments conform to our expectations and predictions is subject to a number of factors, risks, assumptions and uncertainties, many of which are beyond our control, and the effects of which can be difficult to predict, including, but not limited to:
Forward-looking information in this document includes, but is not limited to, statements relating to: any of the Company’s actions made in response to or in connection with the COVID-19 pandemic and other global pandemics and outbreaks of contagious diseases, including with respect to: employee health and safety; potential adjustments to our production plans to align with our customers' production plans, governmental orders and legal requirements, including the ability to meet customers' demands in the event of rapid ramping-up of production volumes following cessation of the COVID-19 pandemic-related slowdowns; the ability to attract and retain the workforce required to maintain or grow the Company's operations in the context of the effects of the COVID-19 pandemic and other global pandemics and outbreaks of contagious diseases on the workforce in certain markets in which the Company operates; the timing of program launches; the growth of the Company and pursuit of, and belief in, its strategies and development and implementation of new product and business; continued investments in its business and technologies; the ability of the Company to complete future business acquisitions; the ability to successfully hedge risks related to currency exchange rates; the ability to finance future capital expenditures, and ability to fund anticipated working capital needs, debt obligations and other commitments; the ability of the Company to counteract or successfully adjust for the effects of increasing inflation in the markets in which the Company operates; the effects of, and the measures the Company may take to address, the effects of ongoing global conflicts and economic sanctions related to them; the Company’s views on its liquidity and operating cash flow and ability to deal with present or future economic conditions; the potential for fluctuation of operating results; and the payment of any dividends as well as other forward-looking statements.
In evaluating forward-looking statements or forward-looking information, we caution readers not to place undue reliance on any forward-looking statement or forward-looking information expressed herein, and readers should specifically consider the various factors which could cause actual events or results to differ materially from those indicated by such forward-looking statements, including the risk factors listed above as well as these and other risks and uncertainties as may be described in greater detail in the Company’s public filings made with the Canadian Securities Administrators and publicly available on the Company’s profile at www.sedar.com, or other factors that may fall outside any list of risks and uncertainties. We do not undertake to update any forward-looking information whether as a result of new information, future events or otherwise, or to update the reasons why actual results could differ from those reflected in the forward-looking statements except as required under applicable securities laws in Canada.
ABC Technologies is a leading manufacturer and supplier of custom, highly engineered, technical plastics and lightweighting innovations to the North American light vehicle industry, serving more than 25 OEM customers globally through a strategically located footprint. ABC Technologies’ integrated service offering includes manufacturing, design, engineering, material compounding, machine tooling and equipment building that are supported by a by a team of skilled professionals (including professional practicing engineers and additional employees with technical diplomas or at least 15 years technical working experience serving in other technical engineering roles), which we believe ultimately contributes to our differentiated product innovation. Our vertically integrated capabilities include our tool-building and material compounding businesses, which we believe allows us to stay on the leading edge of technical plastics and lightweighting product innovation. In addition, our manufacturing footprint provides us with 250-mile coverage for the majority of our OEM customers’ North American light vehicle manufacturing facilities, which we also believe provides us with logistical and competitive advantages. The Company offers six product groups: HVAC Systems, Interior Systems, Exterior Systems, Fluid Management, Air Induction Systems, and Flexible & Other.
Investor Contact: Nathan Barton Investor Relations investors@abctech.com
Investor Contact: Nathan Barton Investor Relations investors@abctech.com