SERVICE SECTOR / Prudential Steel Record 1997 Results
PRUDENTIAL STEEL LTD.
TSE SYMBOL: PTS
FEBRUARY 25, 1998
Prudential Steel Posts Record Earnings
CALGARY, ALBERTA--
HIGHLIGHTS
Three Months Ended Twelve Months Ended
December 31 December 31
Percent Percent
1997 1996 Change 1997 1996 Change
--------------------------------------------------------------
Earnings per Share $0.43 0.32 34 $1.42 0.72 97
Shipments, Metric
Tonnes 104,670 85,995 22 369,010 257,097 44
Per Tonne 1997 1996 1997 1996
--------------------------------------------------------------
Sales $ 952 951 $ 954 945
Cost of Sales 730 741 741 768
Gross Profit 222 210 213 177
Prudential Steel Ltd. announced record-setting financial
performance, for the year ended December 31, 1997. Net income for
1997 reached $42.8 million or $1.42 per share ($1.39 fully
diluted), a 97 percent increase over 1996 net income. For the
fourth quarter of 1997, net income reached $13.0 million or $0.43
per share. These highest-ever earnings are the direct result of
record demand for energy-related tubular products.
Sales for 1997 were $352 million, representing an increase of
nearly 45 per cent over 1996 sales of $242.9 million. Sales of
energy related products were driven by the record 18.2 million
metres drilled in western Canada during 1997, a 30 per cent
increase over 1996. For the fourth quarter, sales were $99.7
million, compared to $81.8 million in the same period of 1996.
Product shipments for the year totalled 369,010 tonnes, 44 per
cent more than in 1996. Shipments in the fourth quarter increased
21.7 per cent over 1996 to 104,670 tonnes. Energy-related
products continue to be the largest component of Prudential's
sales, representing 74 per cent of total shipments in 1997.
Shipments of Oil Country Tubular Goods increased 31 per cent while
line pipe shipments increased 65 per cent over 1996. Industrial
product shipments in 1997 were down nearly two per cent due to
Prudential's focus on energy products.
The average selling price per tonne increased by one per cent in
1997. Total cost of sales was up approximately 38 per cent over
1996. On a per tonne basis, the average cost of sales declined
3.6 per cent from the 1996 average.
Gross margins for the year averaged $213 per tonne, up 20 per cent
over the 1996 gross margins of $177 per tonne. Gross margins in
the fourth quarter were $222 per tonne, up eight per cent from the
third quarter.
OUTLOOK
Prudential Steel remains optimistic about the long-term future of
the business even though some uncertainty exists in energy
industry predictions for 1998 when compared to the record-breaking
activity of 1997. Current energy industry forecasts predict that
overall activity may decrease 14 per cent from 1997. However, the
predicted level of activity is still 60 per cent higher than the
10-year average of 10 million metres per year. In 1997, the
Canadian energy industry turned to imports to supply an estimated
20 to 25 per cent of energy-related tubulars since Canadian
tubular producers could not meet the total demand. It is
anticipated that the weakened Canadian dollar and lower drilling
activity will substantially decrease the level of imports in 1998.
Decreased heavy oil activity is not anticipated to be a large
factor for Prudential Steel, as our overall customer base is
widely engaged in exploration and production across western
Canada.
The market for Hollow Structural Sections is anticipated to grow
in North America, with imports into Canada remaining low.
Prudential Steel anticipates stable demand for these products.
On the cost side, we expect a marginal increase in steel pricing
during the first half of 1998. For the latter half of the year,
factors indicate that steel prices will remain steady or decline.
CAPITAL PROGRAM UPDATE
In November 1997, the company announced its $23.3 million
expenditure for the construction a new tubular manufacturing and
distribution facility in Longview, Washington. This facility will
have an annual production capacity of 125,000 tonnes. Start-up is
expected late in the fourth quarter of 1998.
The $7.3 million capital expenditure announced in March 1997 to
upgrade Mill #2 in Calgary, will be completed in July 1998 and
will provide an additional 20,000 tonnes of annual capacity.
The recommissioning of Mill #1 in Calgary, announced in July 1997,
was completed ahead of schedule in December 1997 and will provide
an additional 60,000 tonnes of annual capacity.
DIVIDEND DECLARED
At the February 25, 1998 Board Meeting, the Board declared a
dividend of $0.05 per share for the shareholders of record at the
close of business on March 16, 1998, to be paid on or about March
31, 1998.
Prudential Steel is listed on The Toronto Stock Exchange and
trades under the symbol PTS.
/T/
------------------------------------------------------------
Prudential Steel Ltd.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
($ in thousands, except per share amounts)
------------------------------------------------------------
THREE MONTHS TWELVE MONTHS
ENDED ENDED
DECEMBER 31 DECEMBER 31
1997 1996 1997 1996
------------------------------------------------------------
Sales $99,675 81,811 $352,021 242,934
Cost of sales 76,454 63,729 273,269 197,498
------------------------------------------------------------
Gross profit 23,221 18,082 78,752 45,436
------------------------------------------------------------
Expenses
Selling, general and
administration 2,050 2,220 8,091 7,812
Interest income (352) (101) (861) (185)
Depreciation 976 912 3,815 3,648
------------------------------------------------------------
2,674 3,031 11,045 11,275
------------------------------------------------------------
Income before
income taxes 20,547 15,051 67,707 34,161
Income tax 7,569 5,540 24,907 12,605
------------------------------------------------------------
Net income for
the period 12,978 9,511 42,800 21,556
Retained earnings,
beginning of period 68,051 33,745 42,254 24,700
Cash dividends (1,511) (1,002) (5,536) (4,002)
------------------------------------------------------------
Retained earnings,
end of period $79,518 42,254 $79,518 42,254
------------------------------------------------------------
Earnings per share
- Basic $ 0.43 0.32 $ 1.42 0.72
- Fully diluted $ 0.42 0.31 $ 1.39 0.70
------------------------------------------------------------
Shipments,
Metric Tonnes 104,670 85,995 369,010 257,097
------------------------------------------------------------
------------------------------------------------------------
Prudential Steel Ltd.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
($ in thousands)
------------------------------------------------------------
AS AT DECEMBER 31 AS AT DECEMBER 31
1997 1996
------------------------------------------------------------
Current Assets
Cash and cash
equivalents $26,279 $ 2,471
Accounts receivable 53,183 47,464
Inventories 64,285 44,737
Prepaid expenses 468 454
------------------------------------------------------------
Total current assets 144,215 95,126
------------------------------------------------------------
Current Liabilities
Accounts payable and
accrued liabilities 38,070 28,380
Income taxes payable 12,687 7,189
------------------------------------------------------------
Total current liabilities 50,757 35,569
------------------------------------------------------------
Working capital 93,458 59,557
Property, plant,
and equipment 28,434 25,089
Deferred pension expense 1,863 1,592
------------------------------------------------------------
Capital employed 123,755 86,238
------------------------------------------------------------
Deduct
Post employment
benefits payable 465 446
Deferred income taxes 1,910 2,254
------------------------------------------------------------
Shareholders' equity 121,380 83,538
------------------------------------------------------------
Shareholders' equity
is represented by
Common shares 41,862 41,284
Retained earnings 79,518 42,254
------------------------------------------------------------
$121,380 $83,538
------------------------------------------------------------ |
