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KHD Humboldt Wedag International Ltd. Reports 2008 Second Quarter and Six- Month Results

08/13/2008
- EPS increase by 71%; Order intake up 98%; Backlog tops $1.3 billion -
HONG KONG, Aug 13, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- KHD Humboldt Wedag International Ltd. (NYSE: KHD) today announced results for the second quarter and six-months ended June 30, 2008. All dollar figures are in U.S. dollars.

For the six months ended June 30, 2008, KHD reported revenues from continuing operations of $281.1 million and pro forma net income for the period was $32.5 million or $1.06 per share diluted, an EPS increase of 71 percent over the $18.8 million or $0.62 per share for the first six months of 2007. Pro forma net income excludes a non-cash charge of $5.4 million, net of income tax, for an unrealized loss on currency held in dollars in overseas banks, due to the rise in the value of the Euro compared to the dollar. Net income including this unrealized currency loss for the period was $27.1 million or $0.89 per share diluted. For a reconciliation of net income and pro forma net income, see the consolidated statements of income included on page 7.

Revenue for the quarter ended June 30, 2008, was $144.2 million, a decrease over 2007 second-quarter revenues of $159.5 million. Pro forma net income for the period was $19.4 million or $0.63 per share diluted, an EPS increase of 85 percent over the $10.3 million or $0.34 per share for the first quarter of 2007. Pro forma net income excludes a non-cash gain of $0.2 million, net of income tax, for an unrealized gain on currency held in dollars in overseas banks, due to the decrease in the value of the Euro compared to the dollar. Net income including this unrealized currency gain for the period was $19.7 million or $0.64 per share diluted. For a reconciliation of net income and pro forma net income, see the consolidated statements of income included on page 8.

     Contact Information:    Allen & Caron Inc.
            Joseph Allen (investors)
            1 (212) 691-8087
            joe@allencaron.com
            or
            Brian Kennedy (media)
            1 (212) 691-8087
            brian@allencaron.com
            Rene Randall
            KHD Humboldt Wedag International Ltd.
            1 (604) 683-8286  ex 224
            randall.r@khd.de
            

Order intake for the six months ended June 30, 2008 was $608.4 million, an increase of 98 percent over the first six months of 2007, with 57 percent of the first six months of 2008 order intake coming from the emerging markets of Russia and Eastern Europe and 30 percent from Asia.

Order intake for the quarter ended June 30, 2008 was $320.1 million, an increase of 105 percent over second quarter 2007, with 53 percent of the second quarter 2008 order intake coming from the emerging markets of Russia and Eastern Europe and 31 percent from Asia.

The Company's order backlog at June 30, 2008 was $1.3 billion, up 96 percent from the same period of 2007, with 41 percent from Russia and Eastern Europe, 26 percent from the Middle East and 26 percent from Asia.

At June 30, 2008, the Company had $445.9 million in cash, cash equivalents, short-term cash deposits, and short-term securities. The current ratio was 1.60, and the long-term debt-to-equity ratio was 0.04.

CEO Jim Busche commented, "Our gross profit margin for the six month period ended June 30, 2008 increased to 19.1 percent compared to 14.8 percent for the same period in 2007 and was 19.6 percent compared to 12.2 percent for the three months periods ended June 30, 2008 and 2007, respectively. There were several factors that contributed to the increase including more efficient project execution on a number of projects, cost savings related to the success of our global procurement initiative and the completion of warranty periods on several projects at better than historical levels resulting in the release of provisions on the expiration of these warranty periods."

Jim continued, "We must continue to concentrate on execution, margins, converting the strong backlog into earnings and building the value of KHD in a risk prudent manner. We continue to build our capability and capacity to offer and successfully execute an expanded scope of services. The nature of the potential work and the location of certain opportunities result in a risk profile that could be higher than our traditional services. We continue to be selective in choosing which opportunities we have and will pursue with a renewed emphasis on value, margin and risk. Furthermore, we have and will continue to target higher margin projects on a global basis, rather than our historical practice of targeting the highest margin projects in a specific geography. We believe it is important our shareholders clearly understand our strategy and although a consequence of this strategy may be fewer mega-project awards compared to some of our competitors, the objective of our strategy is continued generation of quality earnings."

Our guidance on order intake and earnings per share for the full year 2008 which we gave in our April 2, 2008 news release has not changed. For the year 2008, we expect order intake to increase to $1.1 billion and earnings per share to be in the range of $2.05 to $2.15 for the year.

CFO Alan Hartslief commented, "We continue to hold $100 million of cash, earmarked for investment in growth, in dollars rather than in Euros. The recent appreciation of the dollar against the Euro, which significantly reduces the reported unrealized foreign exchange loss on these funds, illustrates the need from an economic perspective for KHD to hold cash in both US dollars and Euros".

Alan further commented, "Our general and administrative expenses, excluding stock based compensation, increased to $26.6 million for the six- month period ended June 30, 2008 from $20.3 million in 2007 and for the three- month period ended June 30, 2008 it increased to $13.7 million from $10.8 million in 2007. A large proportion of our expenses are incurred in currencies other than the dollar; a weakening of the dollar therefore increases our reported expenses. General and administrative expenses increased for the six month period by approximately $2.9 million and for the three month period by $1.5 million, as a consequence of the weakening dollar. Additional costs, related to Wabush iron ore royalty arbitration, were also incurred. The remaining increase is primarily linked to the growth of administrative and supporting services for the expansion of business activities."

Based upon the period average exchange rates for the six-month period ended June 30, 2008, the dollar decreased by approximately 13.1 percent in value against the Euro, compared to the period average exchange rates in 2007. As at June 30, 2008, it had decreased by approximately 7.3 percent against the Euro since December 31, 2007.

We encourage our shareholders to read the entire Form 6-K, which has been filed with SEC, for a greater understanding of our company. The Form 6-K is also available on the Company website.

Today at 10:00am EDT (7:00am PDT), a conference call will be held to review the Company's results; this call will be broadcast live over the Internet at http://www.khdhumboldt.com or http://www.earnings.com. An online archive will be available immediately following the call and continue for seven days or to listen to the audio replay by phone, dial: 1 (888) 286 8010 using conference ID # 57651842. International callers should dial: 1 (617) 801 6888. The Form 6K has been filed with the SEC is available on KHD website.

About KHD Humboldt Wedag International Ltd.

KHD Humboldt Wedag International Ltd. owns companies that operate internationally in the industrial plant engineering and equipment supply industry, and specializes in the cement, coal and minerals processing industries. To obtain further information on the Company, please visit our website at http://www.khdhumboldt.com

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. These assumptions, which include, management's current expectations estimates and assumptions about certain projects and the markets the Company operates in, are expressed or implied by the forward-looking statements, including, but not limited to: (1) a downturn in general economic conditions in Russia, 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 and disputes regarding the performance of our services, (11) the uncertainty of government regulation and politics in Russia, 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 and our MD&A filed with Canadian security regulators.

                         - FINANCIAL TABLES FOLLOW -
            KHD HUMBOLDT WEDAG INTERNATIONAL LTD.
            CONSOLIDATED BALANCE SHEETS
            June 30, 2008 and December 31, 2007
            (unaudited)
            (U.S. Dollars in Thousands)
            ASSETS                                  2008                       2007
            Current assets
            Cash and cash equivalents            $425,774                   $354,397
            Short-term cash deposits                8,466                          0
            Securities                             11,693                     15,510
            Restricted cash                        32,941                     24,116
            Accounts receivable, trade             76,189                     62,074
            Other receivables                      26,573                     18,585
            Inventories                           114,979                    124,980
            Contract deposits, prepaid and other   60,350                     33,775
            Future income tax assets                  899                        825
            757,864                    634,262
            Non-current assets
            Property, plant and equipment           3,079                      2,957
            Interest in resource property          31,213                     32,865
            Equity method investments                 586                        654
            Future income tax assets               22,655                     24,658
            Investment in preferred shares of
            former subsidiaries                   89,207                     91,960
            Other non-current assets                2,921                      1,955
            149,661                    155,049
            $907,525                   $789,311
            KHD HUMBOLDT WEDAG INTERNATIONAL LTD.
            CONSOLIDATED BALANCE SHEETS (cont')
            June 30, 2008 and December 31, 2007
            (unaudited)
            (U.S. Dollars in Thousands)
            2008            2007
            LIABILITIES
            Current liabilities
            Accounts payable and accrued expenses          $157,558        $147,869
            Long-term debt, current portion                     321               0
            Progress billing above costs and estimated
            earnings on uncompleted contracts              248,720         184,830
            Advance payments received from customers         24,840           9,190
            Income tax liabilities                            9,007          20,658
            Accrued pension liabilities, current portion      2,378           2,205
            Provision for warranty costs, current portion    31,746          31,503
            474,570         396,255
            Long-term liabilities
            Long-term debt, less current portion             14,491          13,920
            Accrued pension liabilities, less current
            portion                                         33,074          30,981
            Provision for warranty costs, less current
            portion                                         11,376          11,799
            Deferred credit, future income tax assets        12,627          15,712
            Future income tax liability                       8,937           2,593
            Other long-term liabilities                       5,666           4,931
            86,171          79,936
            Total liabilities             560,741         476,191
            MINORITY INTERESTS                                 5,691           5,926
            SHAREHOLDERS' EQUITY
            Common stock, without par value; authorized
            unlimited number                               143,542         138,359
            Treasury stock                                  (93,793)        (93,793)
            Contributed surplus                               5,415           4,319
            Retained earnings                               189,734         162,633
            Accumulated other comprehensive income           96,195          95,676
            341,093         307,194
            $907,525        $789,311
            KHD HUMBOLDT WEDAG INTERNATIONAL LTD.
            CONSOLIDATED STATEMENTS OF INCOME
            For Six Months Ended June 30, 2008 and 2007
            (unaudited)
            (U.S. Dollars in Thousands, Except per Share Data)
            2008                     2007
            Revenues                               $281,076                 $266,452
            Cost of revenues                        227,537                  226,919
            Gross profit                             53,539                   39,533
            Income from interest in resource
            property                                14,194                    7,176
            General and administrative expense      (26,563)                 (20,252)
            Stock-based compensation                 (2,126)                  (2,455)
            Operating income                         39,044                   24,002
            Interest income                          10,875                    5,330
            Interest expense                           (961)                  (1,559)
            Foreign currency transactions losses,
            net                                     (9,021)                  (1,627)
            Other income (expenses), net             (3,363)                   3,418
            Income before taxes from
            continuing operations                   36,574                   29,564
            Provision for income taxes:
            Income taxes                            (6,106)                  (8,515)
            Resource property revenue taxes         (3,091)                  (1,648)
            Income before minority interests,
            continuing operations                   27,377                   19,401
            Minority interests                         (276)                  (1,002)
            Income from continuing operations        27,101                   18,399
            Income from discontinued operations,
            net of tax                                   0                      350
            Net income                              $27,101                  $18,749
            Net income under GAAP                    27,101                   18,749
            Unrealized foreign currency translation
            loss on cash held for investment, net
            of income tax                            5,393                        0
            Pro forma net income                    $32,494                  $18,749
            Diluted earnings per share
            continuing operations                    $0.89                    $0.61
            discontinued operations                      0                     0.01
            $0.89                    $0.62
            Pro forma diluted earnings per share
            continuing operations                    $1.06                    $0.61
            discontinued operations                      0                     0.01
            $1.06                    $0.62
            Weighted average of common shares
            outstanding - diluted               30,617,689               30,128,092
            KHD HUMBOLDT WEDAG INTERNATIONAL LTD.
            CONSOLIDATED STATEMENTS OF INCOME
            For Three Months Ended June 30, 2008 and 2007
            (unaudited)
            (U.S. Dollars in Thousands, Except per Share Data)
            2008                     2007
            Revenues                               $144,240                 $159,544
            Cost of revenues                        115,908                  140,139
            Gross profit                             28,332                   19,405
            Income from interest in resource
            property                                10,228                    5,622
            General and administrative expense      (13,718)                 (10,779)
            Stock-based compensation                 (1,063)                  (2,057)
            Operating income                         23,779                   12,191
            Interest income                           5,813                    2,374
            Interest expense                           (442)                    (715)
            Foreign currency transactions losses, net  (596)                  (2,161)
            Other income (expenses), net             (2,021)                   2,442
            Income before taxes from continuing
            operations                              26,533                   14,131
            Provision for income taxes:
            Income taxes                            (4,415)                  (3,118)
            Resource property revenue taxes         (2,215)                  (1,285)
            Income before minority interests,
            continuing operations                   19,903                    9,728
            Minority interests                         (233)                     556
            Income from continuing operations        19,670                   10,284
            Income (loss) from discontinuing
            operations, net of tax                       0                      (15)
            Net income                              $19,670                  $10,269
            Net income under GAAP                    19,670                   10,269
            Unrealized foreign currency translation
            loss on cash held for investment, net
            of income tax                             (240)                       0
            Pro forma net income                    $19,430                  $10,269
            Diluted earnings per share
            continuing operations                    $0.64                    $0.34
            discontinued operations                   0.00                        0
            $0.64                    $0.34
            Pro forma diluted earnings per share
            continuing operations                    $0.63                    $0.34
            discontinued operations                      0                        0
            $0.63                    $0.34
            Weighted average of common shares
            outstanding - diluted               30,707,222               30,398,992
            KHD HUMBOLDT WEDAG INTERNATIONAL LTD.
            FINANCIAL SUMMARY
            As of June 30, 2008
            (unaudited)
            (U.S. Dollars in Thousands, Except per Share Data and Ratios)
            Cash, cash equivalents and short-term cash deposits             $434,240
            Short-term securities                                             11,693
            Restricted cash                                                   32,941
            Working capital                                                  283,294
            Total assets                                                     907,525
            Shareholders' equity                                             341,093
            Book value per share                                               11.18
            Current ratio                                                       1.60
            Long-term debt to equity ratio                                      0.04
            

SOURCE KHD Humboldt Wedag International Ltd.

http://www.khdhumboldt.com/
            
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