Press release from Marketwire
Noranda Income Fund Reports Second Quarter Earnings Before Income Taxes of $14.5 Million
Thursday, July 25, 2013
Noranda Income Fund Reports Second Quarter Earnings Before Income Taxes of $14.5 Million16:30 EDT Thursday, July 25, 2013
SALABERRY-DE-VALLEYFIELD, QUÉBEC--(Marketwired - July 25, 2013) - Noranda Income Fund (the "Fund") (TSX:NIF.UN) had a strong second quarter. The Fund's financial results continue to be supported by the stability of the Supply and Processing Agreement.
Q2 2013 and Subsequent Highlights
- Earnings before income taxes were $14.5 million (Q2 2012 - $11.8 million)
- Zinc metal production was 68,286 tonnes (Q2 2012 - 65,521 tonnes)
- Zinc metal sales were 75,081 tonnes (Q2 2012 - 69,664 tonnes)
- Zinc premiums averaged 8.4 cents US per pound (Q2 2012 - 7.4 cents US per pound)
- Sulphuric acid netback remained strong at US$72 per tonne (Q2 2012 - US$71 per tonne)
- Monthly cash distributions from April to July 2013 were $0.04167 per priority unit (each a "Priority Unit"); continuing the consistent monthly distribution since they were restarted in September 2011
- The Fund's debt was $62.3 million (net of deferred financing fees), down from $95.5 million at the end of December 2012
Conference Call and Webcast:
July 26 th , 2013 at 9:30 a.m.
|Dial in number: 416-340-2216|
|Toll-free North American number: 1-866-226-1792|
In addition, you can listen to the teleconference and view the slide presentation from the Conference Call section of our website: http://www.norandaincomefund.com/investor/conference.html or click on this link: http://www.gowebcasting.com/4470
Recording of the Conference Call:
|Dial in number: 905-694-9451 or|
|Toll-free North American number: 1-800-408-3053.|
|The pass code is 4372 873# and you will be prompted for your name and company.|
|The recording will be available until midnight on August 9th, 2013.|
Work on the long-term strategy for the Fund continues with the services of an industry consultant who is assisting the Independent Committee in identifying possible alternative sources of zinc concentrate after the expiry of the Supply and Processing Agreement in 2017.
2013 Capital Spending
The main focus of the 2013 capital spending program is the $20 million silica removal project. By the end of June 2013, $3.2 million had been spent. In line with the budget, the bulk of the spending is expected to occur during the second half of the year. Commissioning remains scheduled for the summer of 2014.
Financial and Operating Highlights (Second quarter 2013 compared to the second quarter 2012)
Earnings before income taxes in the second quarter of 2013 were $14.5 million compared to $11.8 million in the same quarter a year ago. The $2.7 million increase was mainly due to stronger premiums and zinc metal sales, higher processing fee and the impact from movement in the exchange rate during the quarters, partially offset by negative concentrate payable settlement adjustments.
Cash provided by operating activities in the second quarter of 2013, before net changes in non-cash working capital items, was $17.3 million compared to $13.8 million during the same period of 2012. Cash distributions of $4.7 million were declared in both the 2013 and 2012 quarterly periods. During the second quarter of 2013, non-cash working capital decreased by $32.0 million in a large part due to a decrease in accounts receivable and inventories. During the second quarter of 2012, non-cash working capital decreased by $7.0 million due to a decrease in inventories, partially offset by an increase in accounts receivable and a decrease in accounts payable and accrued liabilities.
Financial and Operating Highlights (First half of 2013 compared to the first half of 2012)
Earnings before income taxes in the first half of 2013 were $41.8 million compared to $27.2 million in the same quarter a year ago. The $14.6 million increase was mainly due to stronger premiums and zinc metal sales and higher processing fee, positive concentrate payable settlement adjustments, the impact from movement in the exchange rate during the half years, partially offset by lower by-product revenues.
Cash provided by operating activities in the first half of 2013, before net changes in non- cash working capital items, was $32.7 million compared to $32.1 million during the same period of 2012. Cash distributions of $9.4 million were declared in both the first six months of both years. During the first half of 2013, non-cash working capital decreased by $10.9 million due to a decrease in inventories and accounts receivable, partially offset by a decrease in accrued liabilities. During the first half of 2012, non-cash working capital increased by $17.0 million due to a decrease in income taxes payable and accrued liabilities, partially offset by a decrease in inventories and accounts receivable.
A full version of the second quarter 2013 Management's Discussion and Analysis ("MD&A") and the unaudited Interim Condensed Consolidated Financial Statements will be posted on www.sedar.com and on the Fund's website at http://www.norandaincomefund.com/investor/financials.html today, July 25, 2013. Readers should be advised that the summarized communication presented in this press release is limited in its disclosure. It is not a suitable source of information for readers who are unfamiliar with the Fund, and it is not in any way a substitute for reading the second quarter unaudited Interim Condensed Consolidated Financial Statements and MD&A because a reader relying on this summary alone might overlook decision critical information.
This press release contains forward-looking information and statements within the meaning of applicable securities laws, including statements on 2013 capital expenditures and the commissioning of the silica removal project. Forward-looking information involves known and unknown risks, uncertainties and other factors, which may cause actual events, results or performance to be materially different from any future events, results or performance expressed or implied by the forward-looking information, and as a result, the Fund cannot guarantee that any forward-looking statements or information will materialize.
Such risks and uncertainties include, but are not limited to, the effect of general business and economic conditions, the Fund's ability to operate at normal production levels, the Fund's capital expenditure requirements and other general risks and uncertainties set out in the Fund's continuous disclosure documents on available on SEDAR at www.sedar.com.
Forward-looking information contained in this press release is based on, among other things, management's current estimates, expectations, assumptions, plans and intentions, which management believes are reasonable as of the current date, and which are subject to a number of risks and uncertainties. Except as required by law, the Fund does not undertake to update these forward-looking statements or information, whether written or oral, that may be made from time to time by the Fund or on the Fund's behalf.
Noranda Income Fund is an income trust whose units trade on the Toronto Stock Exchange under the symbol "NIF.UN". Noranda Income Fund owns the electrolytic zinc processing facility and ancillary assets (the "Processing Facility") located in Salaberry- de-Valleyfield, Québec. The Processing Facility is the second-largest zinc processing facility in North America and the largest zinc processing facility in eastern North America, where the majority of zinc customers are located. It produces refined zinc metal and various by-products from sourced zinc concentrates. The Processing Facility is operated and managed by Canadian Electrolytic Zinc Limited, a wholly-owned subsidiary of Xstrata Canada Corporation.
Except where otherwise indicated, all amounts in this press release are expressed in Canadian dollars.
Further information about the Noranda Income Fund can be found at www.norandaincomefund.com
SELECTED FINANCIAL AND OPERATING INFORMATION
|Statements of Comprehensive Income Information|
|Raw material purchase costs||77,808||72,755||146,841||151,234|
|Revenues less raw material purchase costs||84,769||79,831||165,791||147,108|
|Selling and administration||5,359||5,750||10,841||11,050|
|Foreign currency loss||3,611||2,067||7,102||428|
|Loss (gain) on derivative financial instruments||(112||)||228||(3,420||)||(685||)|
|Depreciation of property, plant and equipment||10,031||8,913||18,133||16,535|
|Earnings before finance costs and income taxes||16,198||13,891||45,330||31,360|
|Finance costs, net||1,685||2,098||3,559||4,145|
|Earnings before income taxes||14,513||11,793||41,771||27,215|
|Current and deferred income tax expense||3,543||4,576||8,639||9,965|
|Earnings attributable to Unitholders and Non-controlling interest||10,970||7,217||33,132||17,250|
|Distributions to Unitholders||4,687||4,687||9,375||9,375|
|Current income tax recovery on distribution||-||(1,367||)||-||(2,734||)|
|Increase in net assets attributable to Unitholders and Non-controlling interest||6,283||3,897||23,757||10,609|
|Other comprehensive income (loss)||2,962||(1,060||)||5,880||(1,530||)|
|Statements of Financial Position Information||June 30, 2013||Dec. 31, 2012|
|Income taxes receivable||4,574||4,801|
|Property, plant and equipment||265,545||270,867|
|Accounts payable and accrued liabilities||49,744||72,448|
|Total bank and other loans||62,254||95,509|
|Total liabilities excluding net assets attributable to unitholders||174,744||242,621|
|Statements of Cash Flows Information||2013||2012||2013||2012|
|Cash provided by operating activities before cash distributions and net change in non-cash working capital items||22,001||18,437||42,074||41,489|
|Net change in non-cash working capital items||31,956||6,953||10,855||(17,041||)|
|Cash provided by operating activities||49,270||20,703||43,554||15,073|
|Cash used in investing activities||(5,954||)||(5,752||)||(9,917||)||(10,403||)|
|Cash provided by financing activities||(43,941||)||(14,319||)||(33,803||)||(3,777||)|
|Net increase in cash||(625||)||632||(166||)||893|
|Cash distributions declared per Priority Unit||0.12501||0.12501||0.25002||0.25002|
|Zinc concentrate processed (tonnes)||124,309||119,847||257,691||251,988|
|Zinc grade (%)||53.8||54.9||53.3||54.2|
|Zinc recovery (%)||98.2||96.8||97.0||96.6|
|Zinc metal production (tonnes)||68,286||65,521||136,699||128,334|
|Zinc metal sales (tonnes)||75,081||69,664||139,139||131,937|
|Processing fee (cents/pound)||39.5||39.2||39.5||39.2|
|Zinc metal premium (US$/pound)||0.084||0.074||0.084||0.074|
|By-product revenues ($ millions)||9.6||9.6||20.6||21.9|
|Copper in cake production (tonnes)||380||415||1,000||1,152|
|Copper in cake sales (tonnes)||523||487||1,226||1,234|
|Sulphuric acid production (tonnes)||103,270||98,420||209,061||208,706|
|Sulphuric acid sales (tonnes)||104,072||107,262||207,305||217,595|
|Average LME copper price (US$/pound)||3.24||3.57||3.42||3.67|
|Sulphuric acid netback (US$/tonne)||72||71||72||72|
|Average LME zinc price (US$/pound)||0.84||0.87||0.88||0.90|
|Average Cdn/US exchange rate||1.02||1.01||1.02||1.01|
|* 1 tonne = 2,204.62 pounds|
Adjusted Earnings before Distributions to Unitholders, Finance Costs, Income Taxes, Depreciation and Amortization ("Adjusted EBITDA")
Adjusted EBITDA is used by the Fund as an indication of cash generated from operations. Adjusted EBITDA is not a recognized measure under International Accounting Standard and therefore the Fund's method of calculating Adjusted EBITDA is unlikely to be comparable to methods used by other entities.
The Fund's Adjusted EBITDA is calculated by starting from earnings before finance costs and income taxes and adjusting for all of the non-cash items such as depreciation, (gain) loss on the sale of assets, changes in fair value of embedded derivatives and non- cash gain on derivative financial instruments. In addition, an adjustment is made to reflect the net change in the rehabilitation liability (reclamation (recovery) expense less site restoration expenditures) and the net change in employee benefits (non-cash employee benefit expenses less employer contributions).
The Fund's Adjusted EBITDA is currently supported by the stability of the Supply and Processing Agreement. It is expected that the Fund's Adjusted EBITDA will be subject to more variability once this agreement expires in May 2017.
A reconciliation of Adjusted EBITDA that compares the second quarter and first half of 2013 to the same periods in 2012 can be found in the table below:
|Earnings before finance costs and income taxes||$||16,198||$||13,891||$||2,307|
|Depreciation of property, plant and equipment||10,031||8,913||1,118|
|Net change in rehabilitation liability||(1,693||)||1,319||(3,012||)|
|Gain on derivative financial instruments||(724||)||(1,491||)||767|
|Change in fair value of embedded derivatives||2,726||1,145||1,581|
|(Gain) loss on sale of assets||(233||)||90||(323||)|
|Net change in employee benefits||(134||)||(486||)||352|
|Earnings before finance costs and income taxes||$||45,330||$||31,360||$||13,970|
|Depreciation of property, plant and equipment||18,133||16,535||1,598|
|Net change in rehabilitation liability||(2,739||)||302||(3,041||)|
|Gain on derivative financial instruments||(5,410||)||(1,127||)||(4,283||)|
|Change in fair value of embedded derivatives||(1,229||)||4,861||(6,090||)|
|(Gain) loss on sale of assets||(562||)||308||(870||)|
|Net change in employee benefits||(332||)||(679||)||347|
FOR FURTHER INFORMATION PLEASE CONTACT:
Michael Boone, Vice President & Chief Financial Officer
Canadian Electrolytic Zinc Limited,
Noranda Income Fund's Manager