Highwood third quarter report
Highwood Resources Ltd HWD
Shares issued 21,811,459 Dec 23 close $0.61
Tue 28 Dec 99 Company Review
Mr. Jim Roxburgh reviews the company
Throughout this third quarter ended Sept. 30, 1999, and for the nine months
of 1999, Highwood has operated its industrial mineral divisions profitably.
The operating results have come in better than expected and management is
optimistic that this performance will continue to year-end. Revenues for
this third quarter were $4,207,906, up $822,528, or 24.3 per cent, from the
same three-month period in 1998. Gross margin was 3 per cent higher in this
quarter than that in 1998, owing to a higher proportion of value-added
products being sold this year, as compared with last. Year-to-date gross
margin is 1.4 per cent higher than in 1998. Year-to-date revenues were
$12,709,046, compared with $10,246,701 in 1998, an increase of 24 per cent.
A significant part of this increase is attributable to the Canada Talc
operations which, for comparative purposes, are not reflected in the 1998
figures as this was a current year acquisition.
Net earnings for the three months ended Sept. 30, 1999, were $213,033, or
one cent per share, compared with earnings of $193,372, or one cent per
share, for the same period in 1998.
Year-to-date net earnings were $581,588, or 26 cents per share, compared
with $550,089, or 2.5 cents per share, for the same nine-month period in
1998. Expenses were in line with expectations.
The business focus of the company is the manufacture and marketing of high
value-added industrial mineral products. The resolution of the sale of the
controlling ownership share block now permits the company to move forward,
turning to a "New Page" in its evolution. This can occur by capitalizing on
the synergies accruing through the technology capabilities and contract
minerals services brought by the association of Highwood with the Dynatec
Corporation group of companies.
These synergies will be specifically harnessed in our new approach in the
development, to world-class standards in terms of environmental protection
and stakeholder participation, of the high quality beryllium potential from
the Thor Lake deposit. A "New Page" approach is being developed, taking
advantage of the extensive technical and economic work done in the past. In
October, 1999, Highwood moved 46 tonnes of ore from site, prior to
freeze-up, to permit environmental test work and material characterization
to be undertaken. A comprehensive review of all the work to date is under
way.
During the fourth quarter of 1999 and into the first quarter of 2000, the
transfer to Canada Talc of the barite filler production from the Lethbridge
plant will be completed as planned. Highwood will then have the unique
capability to service customers world-wide with consistent specification
and in conformance to ISO9000 standards from its plants located in
Lethbridge (Alberta), Sino-Can (China), and now Canada Talc (Ontario).
The capital program to bring on line the Canada Talc operations in both
barite and talc is on track. The barite micronizing and talc grinding
circuit capital program is nearing completion. Production of ISO9000
standard barite from this major new facility located strategically near the
company's major markets will commence in November, 1999. This will permit a
smooth transition from the production currently at Lethbridge. Purchase of
barite feed stock through the company's Chinese Sino-Can joint venture
partner is in place and ocean deliveries are scheduled through 1999 and
2000. These actions will ensure that security of supply and quality for all
the company's customers are in place, including appropriate safety stocks
for all barite grades. Highwood's commitment to this objective is reflected
in the significant investment in product inventory in the third quarter.
All Western Canadian operations are currently under review to determine if
a consolidation of any facilities and product lines is warranted.
The Sino-Can joint venture in China has completed an expansion of its
micronizing capacity. Sales of high grade barite products are strong with
growth domestically in China, and with the Pacific rim customers showing
signs of sustained recovery. The quality and support from our Sino-Can
partner in sourcing high quality barite has been significant and should be
recognized. The long-term benefits of this joint venture are considerable.
Garry Lynkowski advised the board that he was stepping down as president,
and the board has agreed to an arrangement, which will continue his
involvement with Highwood at the executive and board level, making a
contribution as a director and consultant on strategic issues and
opportunities. Mr. Lynkowski will also continue to serve as chief financial
officer. The board approved combining the duties of the chief executive
officer and president.
CONSOLIDATED STATEMENT OF EARNINGS
Nine months ended Sept. 30
1999 1998
Revenue
Sales $12,709,046 $10,246,701
Costs of sales 9,502,516 7,807,067
---------- ----------
3,206,530 2,438,634
---------- ----------
Expenses
General and
administrative 1,476,626 1,024,824
Depreciation and
amortization 956,519 637,099
Exploration 163,588 227,170
Interest on
long-term debt 26,765 44,496
---------- ----------
2,623,498 1,933,589
---------- ----------
Income from
operations 583,032 506,045
Interest income 79,556 125,044
---------- ----------
Net earnings
before income
taxes 662,588 631,089
Income taxes
Current 36,000 36,000
Deferred 45,000 45,000
---------- ----------
Net earnings $ 581,588 $ 550,089
========== ==========
Earnings per
share 2.6 cents 2.5 cents
CONSOLIDATED STATEMENT OF EARNINGS
Three months ended Sept. 30
1999 1998
Revenue
Sales $4,207,906 $3,385,378
Costs of sales 3,106,960 2,600,251
--------- ---------
1,100,946 785,127
--------- ---------
Expenses
General and
administrative 437,904 302,450
Depreciation and
amortization 361,565 219,861
Exploration 56,743 79,745
Interest on
long-term debt 19,762 7,260
---------- ----------
875,974 609,316
---------- ----------
Income from
operations 224,972 175,811
Interest income 15,061 44,561
---------- ----------
Net earnings
before income
taxes 240,033 220,372
Income taxes
Current 12,000 12,000
Deferred 15,000 15,000
---------- ----------
Net earnings $ 213,033 $ 193,372
========== ==========
Earnings per
share 0.9 cent 0.9 cent
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