Disappointing 1st Q results posted today.
JUNE 1, 1998
InnoMat Announces First Quarter Results
TORONTO, ONTARIO--InnoMat Solutions Corp. reported its results for
the first quarter ended March 31, 1998.
Sales for the quarter, of $438,479 were down 40 percent from last
year's $726,332. However, the gross margin on these sales
increased by $6,710, from $48,601 last year to $55,311 this year.
The improved gross margin percentage, from 6.7 percent to 12.6
percent is part of the strategy announced last fall to be more
selective in the business that the Company accepts and by focusing
on higher margin revenue streams. During the quarter the Company
utilized short-term financing with high costs in order to secure
the initiatives discussed below. In addition, we moved our head
office and incurred significant costs to establish InnoMat
Technologies Inc., which is in the start-up phase. Financing
commissions and legal fees, interest charges and relocation
expenses significantly impacted operating losses for the period.
As a result the Company's Operating loss was $381,624 compared to
$179,439 last year.
Mr. Paul E. Kavanagh, Chairman of InnoMat Solutions Corp. stated
"the staff at InnoMat were extremely busy during the first three
months of 1998 to ensure that effective execution of the new
strategy developed last summer took place. To this end, we are
proud that the acquisition of the exclusive rights to the
exciting, new, TPF(r) plastics manufacturing process was
completed. In mid-February we established our new subsidiary,
InnoMat Technologies Inc. to begin exploiting this technology.
Introduction of the capabilities of TPF(r) gained significant
market interest both from potential end users of TPF(r) produced
products and plastics manufacturers. This was evidenced by a
number of prototype orders from InnoMat customers, for a variety
of different types of products. As well, discussions commenced
with over 10 manufacturers interested in accessing the TPF
equipment and licensing the control system software."
Mr. Kavanagh added "the completion of this transaction, and
associated financing by way of a convertible debenture, consumed a
great deal of the company's resources. Nevertheless, management
believes this investment will have significant, long-term benefits
for the Company."
During the first quarter of 1998 the company pursued an
opportunity to rapidly accelerate the strategy of becoming a
vertically integrated organization by finalizing an agreement for
execution to acquire the assets of Brunswick International
Container Systems Inc. Brunswick is a pioneer in managing
returnable container programs and material handling logistics,
offering major manufacturers a host of services including,
packaging engineering, returnable container leasing, depot
services, assets tracking and transportation. Brunswick currently
has a number of long term contracts with major auto parts
manufacturers. Brunswick will be a large consumer of containers
and storage products made by the TPF(r) process. The addition of
Brunswick to the InnoMat group of companies will now provide
InnoMat customers with 'one-stop shopping' for their specialized
materials handling requirements. InnoMat is well positioned to
address growing concerns of manufacturers to reduce costs of
handling and shipping their products, reducing damage and assuming
more environmental responsibility through the use of returnable
containers. This transaction is pending Brunswick's shareholders
approval and is expected to close in June.
These two transactions are essential to building a solid
competitive foundation and market differentiation for InnoMat.
With sales efforts during the first quarter being focused on
developing end-user interest and market development for TPF
products, this had a short-term impact on our results. Revenues
during the period of $438.0k were disappointing, in that, the
majority of shipments were from the backlog carried over from
sales made in late 1997 rather than new business. As well,
certain large potential supply contracts have experienced delays
beyond our control. Nevertheless, gross margins on new business
generated during the past few months have increased from 6 percent
in mid-1997 to 24 percent. This is a result of the strategic
shift away from selling commodity products to more customized
solutions.
The company entered the second quarter with an order backlog of
$830.0k. Sales of TPF equipment and software license fees and
revenues derived from the consolidation of 'Brunswick' operations
are scheduled to commence in June 1998 and will have a positive
affect on revenues and profitability of the company throughout the
remainder of 1998. Short-term cash requirements have restricted
the company from accelerating growth and we are currently
addressing the issue.
The rebuilding of InnoMat is well underway and the results from
these efforts should begin to pay-off. To our shareholders, who
have been patient and supportive throughout this process over the
past nine months, we are extremely appreciative.
We look forward to meeting many of our shareholders at our
upcoming Annual General Meeting, June 8th at 2:00 p.m. Board of
Trade of Metropolitan Toronto, 1 First Canadian Place.
The Corporation's shares are quoted on the Canadian Dealing
Network (CDN) under the trading symbol INAT. There are currently
45,415,701 common shares issued and outstanding. The
Corporation's 12g3-2 (b) exemption with the Securities and
Exchange Commission (US) is No. 82-4262. The information
provided herein has not been approved or disapproved by regulatory
authorities. |
