|
|
The daily news bulletin for the informed
wire & cable executive
Wire & Cable Industry news
Back to Wireworld News
|
April 8th, 2009
- Reports
Vancouver British Columbia - Declining rod prices causes $20.4 million write down at Tree Island Wire.
|
Tree Island Wire Income Fund (the "Fund") today released fourth quarter and full year 2008 financial results. The Fund's results are based on the performance of Tree Island Industries Ltd. ("Tree Island" or "the company") - one of North America's largest producers of wire and fabricated wire products.
For the 12 months ended December 31, 2008, sales volumes increased 4.6% to 237,190 tons and revenue increased 22.2% to $322.7 million
Growth in commercial construction, agricultural and international trading sales offset declining demand in the residential construction market
An unprecedented decline in global steel prices led to a fourth quarter inventory writedown of $20.4 million, with a corresponding negative impact on gross profit, EBITDA, and distributable cash
Net income was negatively affected by charges related to goodwill impairment, fixed asset impairment, inventory write down and valuation adjustments to future income taxes
"Our volumes and revenue improved in 2008, despite weaker residential construction markets and global economic events that negatively affected our fourth quarter results," said Daniel McAtee, President and CEO of Tree Island.
"Through the first three quarters, we achieved gains in both our top and bottom-line performance as we implemented our three-step strategy, leveraged our international capabilities, expanded into new markets and continued to fine tune the profitability of our products and business activities."
"Our fourth quarter results, by contrast, were significantly weaker both sequentially and year-over-year. This period brought a sharp reduction in demand from the residential and commercial construction markets. In addition, the 40% drop in global steel rod prices had a negative impact on fourth quarter product pricing and also resulted in our inventories being overvalued by approximately $34 million at December 31, 2008. In accordance with GAAP, a $20.4 million write down of inventory was recognized during the fourth quarter, while the balance of the overvaluation is expected to negatively impact our cost of goods sold and margins in 2009. These factors had a negative impact on fourth quarter EBITDA, net income and distributable cash results, and as previously reported, put us out of compliance with our debt services covenant with our lenders. We have since renegotiated our credit agreement and implemented a number of cost-cutting actions. These include closing two of our US manufacturing facilities, reducing our total work force by more than 30%, reversing our accrued 2008 management and staff bonuses, placing new restrictions on salaries and hiring, and suspending cash distributions to our unitholders," said Mr. McAtee. "While difficult steps, we believe these are the right actions to take in this economic environment."
"Looking ahead, we anticipate that 2009 will be an exceptionally challenging year with elevated risks related to cash management and credit availability. Careful cash management will be one of our primary focuses, with a particular focus on inventory management. We will continue to leverage our Asian footprint and international trading capabilities to create a more flexible and faster-turning mix of raw, semi-finished and finished goods inventory."
"While we expect demand from our traditional markets will remain weak as a result of the global recession, our efforts to expand our product lines, together with our sales push into new regional and international markets, have given us access to a larger and more diverse market. We believe this will play an important role as we work to offset declines in other areas of our business," said Mr. McAtee.
|
|
|
