- Awarded US$50 Million Contract in Romania - HONG KONG, May 15
/PRNewswire-FirstCall/ -- KHD Humboldt Wedag International Ltd.
("KHD") (NASDAQ:KHDH) announces that it is completing the final
phase of our transition from a financial services company to an
industrial plant engineering and equipment supply company. For the
first quarter of 2006, our financial results are still mixed with
our previous financial service business. The period ended March 31,
2006 included our industrial plant engineering and equipment supply
segment and a one-month period of the financial service business to
January 31, 2006. Our consolidated balance sheet reflects only the
industrial plant engineering and equipment supply segment at March
31, 2006, with a comparison to our December 31, 2005 consolidated
balance sheet which includes both the industrial and engineering
and financial services segments. With the next quarter ending June
30, 2006, we will be entirely separated and our financial position
will be easier to review. To assist in understanding the
transformed company, we are providing limited guidance for the year
2006. It is important to recognize that our revenues include both
engineering services and equipment supply. Some of the equipment
included in our scope of supply may be purchased. The engineering
services portion of our contracts precedes the equipment supply
portion. The engineering services typically have a higher margin
and lower revenue, while the equipment supply brings in higher
revenue and lower margin. Consequently, quarterly results may not
necessarily represent a proportionate share of our annual result as
different portions of contracts start at different times and are
dependent on phased completion. To help investors better understand
the fluctuation of the activities of our industrial plant
engineering and equipment supply business, we provide the following
forecast (FC) to illustrate the movement of the revenues and
earnings before taxes (EBT) for each quarter of 2006 and the full
year 2006. The revenues and EBT are not evenly spread among all
quarters. The following information and other statements in this
release are forward-looking and are subject to risks and
uncertainties that may cause actual results, performance or
developments to differ materially. See the section entitled
"Disclaimer for Forward Looking Information" at the end of this
release for a description of those risks and uncertainties.
INDUSTRIAL PLANT ENGINEERING AND EQUIPMENT SUPPLY March 31, June
30, September December Full Year 2006 2006 30, 2006 31, 2006 2006
(United States dollars in millions) (Unaudited) Actual FC FC FC FC
Revenues $63.3 $100.8 $115.6 $144.9 $424.6 EBT 4.5 7.2 10.7 12.5
34.9 Includes all operating companies active in cement, coal and
minerals technology and their real estate operations, but not
corporate expenses. For the quarter ended March 31, 2006 (all
figures are in US dollars and earnings per share amounts are on a
diluted basis), KHD's industrial plant engineering and equipment
supply services revenue was $63.3 million, compared to $56.1
million in the year-earlier period, primarily as a result of the
separation of our financial services into a separate company on
January 31, 2006. Income before tax increased to $5.1 million,
compared to $4.3 million in the first quarter of 2005. Net income
in the first quarter of 2006 was $2.8 million or $0.19 per share,
compared to $4.9 million or $0.36 per share in the first quarter of
last year. We had a tax expense of $1.8 million in the current
quarter ended March 31, 2006, compared to a tax benefit of $1.7
million in the comparative quarter in 2005. We paid $0.9 million in
income taxes in the current quarter of 2006. Upon the anticipated
completion of our organization restructuring in June 2006, we
expect that our effective income tax rate will be reduced. The
weighted average number of shares increased to 14.7 million on a
diluted basis from 13.7 million in the first quarter of 2005.
During the current quarter, the Euro depreciated by approximately 8
percent against the U.S. dollar and 14 percent against the Canadian
dollar, compared to the same quarter in 2005. The depreciation of
the Euro against U.S. and Canadian dollars reduced our revenue and
net income. The consolidated balance sheet and income statement for
March 31, 2006 were translated from Canadian dollars into U.S.
dollars at U.S. dollar 1 = Canadian dollars 1.1671 (equivalent to
Euro 1 = U.S. dollars 1.2140) For the current period, the revenues
for our industrial plant engineering and equipment supply services
was up 13 percent, although overall revenues declined, due largely
to the restructuring that resulted in the distribution of our
financial services business to shareholders during the quarter.
Order intake during the first quarter increased to $95.4 million,
compared to $79.9 million in the first quarter of 2005. Backlog
increased by 36 percent to $352.4 million, compared to $258.7
million a year earlier. Order intake is defined as the total of all
orders received during the respective period, while order backlog
is defined as the amount of orders received but not yet fulfilled
(for easy comparison, all amounts for order intake and backlog were
translated from Euros to Dollars at 1.1841, the exchange rate
prevailing on December 31, 2005). CEO Jim Busche commented, "The
first quarter order intake was well balanced geographically, and
came from the Middle East 29 percent, Asia 27 percent, Europe 27
percent, the Americas 6 percent and the remaining 11 percent from
other areas. Our strategy is to concentrate on our core strengths
-- equipment design and supply contracts -- as opposed to turnkey
contracts. We are strongest in areas where infrastructure is
growing rapidly, such as Asia and the Middle East, and our long
history and respected standing in those regions stands us in good
stead. Our internal goals for the year are to implement a plan to
increase margins in all our product lines, strategic alliances and
acquire companies to enhance our growth." Chairman Michael Smith
commented, "At the end of the first quarter, KHD has $228.5 million
in cash, cash equivalents and short-term securities. The current
working capital ratio was 1.91. Shareholders' equity rose to $256.7
million and the long-term debt to equity ratio was .08. We
encourage our shareholders to read our SEC Form 6-K filing, now
available on our website, for a greater understanding of our
industrial engineering prospects, as well as the distribution of
the financial services business." KHD is also pleased to announce
that it has been awarded the contract, worth approximately US$50
million, as the leader of a consortium for engineering and supply
of a 4,000 t/d clinker production plant ranging from raw material
feeding system to clinker storage. The plant will be erected in
Campulung, Romania. KHD's scope of supply includes the pyroprocess
including Humboldt 5-stage preheater with combustion chamber,
rotary kiln with PYRO-JET(R) kiln burner and PYROFLOOR clinker
cooler with roll crusher. About KHD Humboldt Wedag International
Ltd. KHD Humboldt Wedag International Ltd. (the "Company") owns
companies that operate internationally in the industrial plant
engineering and equipment supply industry, and specializes in the
cement, coal and mineral industries. To obtain further information
on the Company, please visit our website at
http://www.khdhumboldt.com/ Revenues and Earnings Before Taxes
(EBT) Forecast 2006 Revenues and EBT forecasts are based on KHD's
order backlog, order intake and sales pipeline. We estimate on a
project by project basis which revenues and earnings our current
order backlog will generate, based on the percentage of completion
for each individual project. For our order intake, we assess when
each new project will start to deliver revenues and earnings. We
also take into consideration our sales pipeline to determine the
probability that our proposals will be successful, and when new
projects may commence. In the second quarter, we anticipate an
increase in revenues to $100.8 million. This is based on an
increase to $21.6 million in Q2 (Q1: $1.9 million) at our ZABIS
unit mainly in relation to a project in Russia, and higher levels
of activity in the US and Indian cement operations. Earnings before
tax and minorities increase in line with higher revenues. For the
third quarter, we forecast a further increase in revenues to $115.6
million, and EBT of $10.7 million. Key assumptions are higher
revenues for our Indian (+$4.2 million) and German cement
operations (+$3.6 million), and our coal and minerals business. We
anticipate higher margins in Q3 as a result of the overall mix of
projects handled in Q3, with a strong contribution to earnings from
one specific minerals project in South America. In Q4 we forecast
revenues of $144.9 million and EBT of $12.5 million. This is based
on increase in revenues for projects in the Middle East, India and
the US. Our profit margins in Q4 will decrease slightly compared to
Q3, driven in part by higher sales of equipment which we buy in
from other vendors, and which carry lower margins. Disclaimer for
Forward-Looking Information Certain statements in this release are
forward-looking statements, which reflect the expectations of
management regarding the Company's future growth, results of
operations, performance and business prospects and opportunities.
Forward-looking statements consist of statements that are not
purely historical, including any statements regarding beliefs,
plans, expectations or intentions regarding the future. Such
statements are subject to risks and uncertainties that may cause
actual results, performance or developments to differ materially
from those contained in the statements. No assurance can be given
that any of the events anticipated by the forward-looking
statements will occur or, if they do occur, what benefits the
Company will obtain from them. These forward-looking statements
reflect management's current views and are based on certain
assumptions and speak as of only March 31, 2006. These assumptions,
which include, management's current expectations, estimates and
assumptions about certain projects and the markets the Company
operates in, the global economic environment, interest rates,
exchange rates and the Company's ability to attract and retain
customers and to manage its assets and operating costs, may prove
to be incorrect. A number of risks and uncertainties could cause
our actual results to differ materially from those expressed or
implied by the forward-looking statements, including, but not
limited to: (1) a downturn in general economic conditions in Asia,
Europe, the United States and internationally, (2) a decreased
demand for the Company's products, (3) a decrease in the demand for
cement, minerals and related products, (4) the number of
competitors with competitively priced products and services, (5)
product development or other initiatives by the Company's
competitors, (6) shifts in industry capacity, (7) fluctuations in
foreign exchange and interest rates, (8) fluctuations in
availability and cost of raw materials or energy, (9) delays in the
start of projects included in our forecasts, (10) delays in the
implementation of projects included in our forecasts, disputes
regarding the performance of our services, (11) the uncertainty of
government regulation and politics in Asia and the Middle East and
other markets, (12) potential negative financial impact from
regulatory investigations, claims, lawsuits and other legal
proceedings and challenges, and (13) other factors beyond the
Company's control. Additional information about these and other
assumptions, risks and uncertainties are set out in the "Risks and
Uncertainties" section in our Form 6-K filed with the Securities
and Exchange Commission on May 16, 2006 and our MD&A filed with
Canadian securities regulators. Contact Information: Allen &
Caron Inc Joseph Allen (investors) (212) 691-8087 or Len Hall
(media) (949) 474-4300 Rene Randall KHD Humboldt Wedag
International Ltd (604) 683-8286 -FINANCIAL TABLES FOLLOW- KHD
HUMBOLDT WEDAG INTERNATIONAL LTD. CONSOLIDATED BALANCE SHEETS As of
March 31, 2006 and December 31, 2005 (Unaudited) (amounts in U.S.
dollars; in thousands) ASSETS 2006 2005 Current assets Cash and
cash equivalents $212,360 $194,313 Restricted cash 21,158 22,016
Securities 16,188 16,265 Loans 2,207 10,638 Receivables,
commodities transactions 0 10,450 Receivables, industrial and
engineering services 37,022 34,588 Receivables 15,810 25,533
Commodity inventories 0 24,356 Inventories 34,217 38,641 Real
estate held for sale 27,428 27,479 Contract deposits, prepaid and
other 17,804 11,201 Future income tax assets 6,616 7,594 390,810
423,074 Non-current assets Securities 739 7,893 Loans 9,763 9,436
Properties, plant and equipment 10,609 10,835 Investment in
resource property 30,281 30,312 Goodwill 9,221 12,987 Equity method
investments 867 16,021 Future income tax assets 12,792 12,496
Investment in preferred shares of a former subsidiary 76,281 0
150,553 99,980 $541,363 $523,054 KHD HUMBOLDT WEDAG INTERNATIONAL
LTD. CONSOLIDATED BALANCE SHEETS (con't) As of March 31, 2006 and
December 31, 2005 (Unaudited) (amounts in U.S. dollars; in
thousands) 2006 2005 LIABILITIES Current liabilities Accounts
payable and accrued expenses $143,253 $159,628 Notes payable,
commodities transactions 0 9,890 Notes payable, industrial and
engineering services 14,476 2,944 Long-term debt, current portion 0
1,606 Pension liabilities 1,336 1,489 Deposits 20,803 17,327
Provision for warranty costs 25,075 20,527 Future income tax
liability 0 303 204,943 213,714 Long-term liabilities Long-term
debt, less current portion 20,445 6,253 Pension liabilities 26,442
25,584 Provision for warranty costs 6,426 4,427 Future income tax
liability 8,311 10,154 Other long-term liabilities 530 575 62,154
46,993 Total liabilities 267,097 260,707 Minority interests 17,567
18,088 SHAREHOLDERS' EQUITY Common stock 71,738 62,481 Equity
component of convertible debt 125 125 Retained earnings 211,996
209,416 Cumulative translation adjustment (27,160) (27,763) 256,699
244,259 $541,363 $523,054 KHD HUMBOLDT WEDAG INTERNATIONAL LTD.
CONSOLIDATED STATEMENTS OF INCOME For the Three Months Ended March
31, 2006 and 2005 (Unaudited) (amounts in U.S. dollars; in
thousands, except per share data) 2006 2005 Revenue Industrial and
engineering services $63,318 $56,065 Financial services 35,536
119,323 98,854 175,388 Expenses Industrial and engineering services
51,037 41,731 Financial services 30,613 109,468 General and
administrative 10,880 17,920 Interest 1,238 1,920 93,768 171,039
Income before income taxes 5,086 4,349 Recovery of (provision for)
income taxes (1,762) 1,720 3,324 6,069 Minority interests (528)
(1,122) Net income $2,796 $4,947 Earnings per share Basic $0.19
$0.36 Diluted $0.19 $0.36 Weighted average shares outstanding Basic
14,665,346 13,577,146 Diluted 14,665,346 13,722,491 KHD HUMBOLDT
WEDAG INTERNATIONAL LTD. FINANCIAL SUMMARY As of March 31, 2006
(Unaudited) (amounts in U.S. dollars; in thousands, except per
share data and ratios) Cash and cash equivalents $212,360
Short-term securities 16,188 Working capital 185,867 Total assets
541,363 Shareholders' equity 256,699 Book value per share 16.88
Current ratio 1.91 Long-term debt to equity ratio 0.08 DATASOURCE:
KHD Humboldt Wedag International Ltd. CONTACT: Investors, Joseph
Allen, +1-212-691-8087, , or Media, Len Hall, +1-949-474-4300, ,
both of Allen & Caron Inc, for KHD Humboldt Wedag International
Ltd.; or Rene Randall of KHD Humboldt Wedag International Ltd,
+1-604-683-8286, Web site: http://www.khdhumboldt.com/
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