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In this occasion, Prime Minister Gen. Prayuth led a group of Thai and international media representatives to visit the new face of U-Tapao International Airport, which showcased the country's capability to become the aviation hub of the region. Developed under the "One Airport, Two Missions" concept, U-Tapao International Airport was initially built for national security purpose but later expanded its capability to serve commercial aviation services. The group later visited the Maintenance, Repair and Overhaul Center located at the airport. Aviation is among nine target industries being promoted in the three provinces in EEC area, in which key focuses are those involving high technology and extensive research and development, and crucial to the development of the country's infrastructure and logistics, and promotion of tourism destinations in the areas. Other target industries are Next-Generation Automotive, Smart Electronics, Eco-friendly Petrochemicals and Bio-Chemicals, Automation and Robotics, Medical Hub, Affluent, Medical & Wellness Tourism, Food for the Future and Digital industries. Prime Minister Gen. Prayuth said that, "The Thai government is keen to offer a full support to international investors in these target industries who strive to achieve sustainable development goals, bring a better quality of life to the local community and provide continuing opportunities for local SMEs. We have qualified workforce in the market, as well as utilized best efforts in mitigating investment obstacles and offering attractive privileges and incentives. Most importantly, the EEC Scheme, which was developed for constant and sustainable development, has now been approved by the Council of State and in the process of seeking the Cabinet's approval." On the same day, the Prime Minister also met with 21 top business leaders in relevant organizations and industries including Amata Corporation Public Company Limited, The Japan External Trade Organization (JETRO), PTT Global Chemical Company Limited, Senior Aerospace (Thailand) Limited, BMW etc. Amata affirmed the EEC development supported both local and international investment to align with Thailand 4.0 roadmap, through the recent collaboration with Yokohama Smart City Project provides the blueprint of development of smart city in Amata Nakorn Industrial Estate reduce power consumption and the ambition to build the city of education with a total of 7 educational institutes in the estate. JETRO expressed that Japanese investors were confident on the clear direction of the EEC project and optimistic about the Thai government's recent announcement of Investment Promotion Act 2017. According to Senior Aerospace, to be a part of the new EEC program is a good opportunity to educate local people as well as learn from them, while strengthening the mutual relationship, as well as marks the beginning of business expansion into the future where they foresaw more and more new players in the aviation sector. PTTGC, as a veteran investor in the areas, expressed readiness to embrace new business partners in value-added industry sectors. The Board of Investment of Thailand (BOI) set new chapter of investment promotion - Investment 4.0 to align with the Thai government's Thailand 4.0 policy, which takes into account the shifting to value-based, innovation-driven economy, the development of human capital, and the creation of high value service. BOI's mission to promote investment in the EEC focuses on core technologies that Thailand has strong potential, including biotech, nanotech, advanced material and digital technology. This is in line with BOI's. According to the BOI, those investing in EEC area will enjoy special incentives that are highly competitive and considered 'most enticing ever' offered in Thailand. These include 50% deduction on corporate income tax (CIT) for five years in addition to a CIT exemption of 13 years and other incentives granted in line with the Competitive Enhancement Act, which includes a maximum corporate income tax exemption of 15 years, among others. The government will also provide other supports including eliminating barriers, rules and regulations in order to generate real, high-value investments as well as One Stop Service to facilitate investment in the area. The EEC, consisting of three Eastern provinces Chachoengsao, Chonburi and Rayong, is expected to be a flagship investment and technology hub of Thailand and reshape the future of the country. The development of EEC will bring a great deal of benefits to other regions of Thailand as it directly connects to other Eastern provinces including Prachin Buri, Srakaew, Chantaburi and Trad, as well as serve as economic link between upper and lower Northeastern region, and the Gulf of Thailand. For more information, please contact Name: Apichaya Sophonratana Tel: +662-553-8111 Ext. 6932 E-mail: thailandinvestmentyear@gmail.com or visit www.boi.go.th To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/the-board-of-investment-of-thailand-eec-jumpstart-brings-thailand-closer-to-become-key-asean-investment-and-technology-hub-300449552.html SOURCE The Board of Investment of Thailand (BOI)


News Article | May 9, 2017
Site: globenewswire.com

TORONTO, May 09, 2017 (GLOBE NEWSWIRE) -- Mr. Steve Orr, Chief Executive Officer of Shawcor Ltd. (TSX:SCL) remarked “Shawcor’s financial performance in the first quarter of 2017 continued the trend of quarter over quarter improvement since the low point that was reached in the second quarter of 2016. Results were positively impacted by excellent project execution at our Asia Pacific pipe coating facilities as well as a steady strengthening in market demand for composite pipe and downhole tubular services in North America. Also, the launch of concrete weight coating for the Sur de Texas – Tuxpan ("Tuxpan") project in Altamira, Mexico contributed approximately $20 million of revenue in the quarter.” Mr. Orr added “With production of the concrete coating work for the Tuxpan pipeline project now well underway in Altamira, Mexico, the Company expects to see a renewed acceleration in earnings growth in the second half of 2017 as the Tuxpan project reaches full production. The Company’s current order backlog at $648 million coupled with our expectation that North American well completion activity will continue to improve, provides us with confidence that Shawcor will deliver solid results in 2017. With this positive outlook and the Company’s strong balance sheet, management is in an excellent position to focus on executing our long term growth strategy.” 1 See Section 6.0 – Reconciliation of Non-GAAP Measures for further details and a reconciliation for Adjusted EBITDA. (a) EBITDA is a non-GAAP measure calculated by adding back to net income (loss) the sum of net finance costs, income taxes and amortization of property, plant, equipment and intangible assets. EBITDA does not have a standardized meaning prescribed by GAAP and is not necessarily comparable to similar measures provided by other companies. EBITDA is used by many analysts in the oil and gas industry as one of several important analytical tools. It is also considered important by lenders to the Company. It should not be considered in isolation or used as an alternative to net income or any of the other measures of performance prepared in accordance with GAAP. (b) Attributable to shareholders of the Company. Contract to Provide Pipe Coating Services for Thailand’s Fifth Transmission Pipeline Project On April 7, 2017, the Company announced that its pipe coating division had received a contract in excess of C$40 million from Marubeni-Itochu Tubulars Asia Pte Ltd, a 100% subsidiary of Marubeni-Itochu Steel Inc., to provide internal lining and three layer polyethylene anti-corrosion pipeline coatings for Thailand’s Fifth Transmission Pipeline project. This project is owned by PTT Public Company Limited, a Thai state enterprise company. The pipeline will run through 8 provinces in Thailand and is aimed at reducing risks to electrical power security and easing the delivery of gas from the LNG Terminal in Rayong, Thailand to the Western region. This contract will be executed in Shawcor's coating facilities in Malaysia, and is expected to commence in Q4 2017 and to be completed by Q4 2018. The Company believes that the decline in global oil and gas investment that followed the decrease in oil and gas prices in the second half of 2014 has reached a cycle low and is now beginning to trend towards improvement. Shawcor’s financial performance is closely correlated with oil and gas infrastructure spending and the trend towards stabilization in market demand for the Company’s products and services has enabled the Company to report quarter over quarter gains in revenue and operating income since the trough of the cycle in the second quarter of 2016. The level of improvement in market demand combined with Shawcor’s booked order backlog is expected to enable the Company to deliver solid growth in financial performance in 2017. However, the rate of improvement will vary by region. The region with the most momentum for stronger activity is North America and in particular the number of rigs operating and the number of new oil and gas wells being drilled and completed. As the rig counts in Canada and the USA have improved since early 2016, the demand for the Company’s gathering line pipeline products and services has strengthened. It is expected that increased gathering pipeline construction will lead to new transmission infrastructure investment to accommodate increased production volumes, particularly in west Texas and in the eastern USA. Internationally, economic growth in emerging markets and supportive political mandates to reduce hydrocarbon emissions in electricity generation is leading to investment in new natural gas pipeline infrastructure. Examples include the Company’s Tuxpan undersea natural gas pipeline project in Mexico and the recently awarded PTT 5th Transmission pipeline project in Thailand. These projects are not directly related to new hydrocarbon production and thus oil and gas prices are not determinative in the project investment decision. As a result, the projects are proceeding now at an early stage of the new capital investment cycle. In contrast to natural gas demand driven projects, oil and gas greenfield development projects that enable new hydrocarbon production as well as smaller production sustaining capital projects are lagging as national and international oil companies continue to limit commitments for new projects to ensure that capital spending is in line with reduced operating cash flow. However, capital investments will eventually be required to offset depleting production with resulting growth in demand for Shawcor’s international products and services beyond 2017. Further detail on the outlook for the Pipeline and Pipe Services segment by region and in the Petrochemical and Industrial segment is set out below. Market demand in Shawcor’s North American Pipeline segment businesses is closely tied to well completion activity in North America which drives the demand for small diameter pipe coating and joint protection, composite pipe for gathering line applications, OCTG pipe inspection and refurbishment and gathering line girth weld inspection. Demand for these products and services is expected to fluctuate with changes in global oil and gas prices and the resulting volume of wells drilled and completed. A persistent improvement in drilling rig counts in North America since the second quarter of 2016 has enabled a modest improvement in revenue for Shawcor’s North American Pipeline segment businesses and this trend is expected to continue in 2017. Beyond 2017, the Company expects that the North American Pipeline and Pipe Services segment will benefit from the build of new pipeline infrastructure in the form of tie-back infrastructure in the Gulf of Mexico and new onshore large diameter transmission lines to support increasing production of shale oil and the export of natural gas to Mexico and internationally through LNG. With the launch of concrete weight coating operations in Altamira, Mexico on the Tuxpan project, the Company expects revenue in the Latin America Pipeline segment region to provide strong growth with full production from the two mobile plants expected to be reached by the end of the second quarter. At March 31, 2017, the Company has booked revenue relating to the Tuxpan project included in the backlog of approximately $340 million to be executed from the second quarter of 2017 to the first quarter of 2018. Shawcor’s EMAR Pipeline segment region has been the Company’s region most impacted by the continued deferral of capital spending on new pipeline infrastructure by national and international oil companies. Although project engineering and bidding activity remains very strong in the region, and the Company is pursuing significant revenue opportunities for girth weld inspection, pipeline joint protection and pipe end preservation on both the Turk Stream and Nord Stream 2 pipelines, these opportunities are not likely to benefit revenue until 2018 or later. The Company’s Asia Pacific region has benefited over the past two quarters from the execution of the flow assurance work for the Shah Deniz project and the anti-corrosion coating for pipe destined for Mexico for the Tuxpan project. With the region’s involvement in the coating of these projects now complete, revenue will decrease as project activity will be limited until the PTT 5th Transmission pipeline project commences later in the year. Shawcor’s Petrochemical and Industrial segment businesses continue to deliver steady growth in revenue and earnings based on consistent demand growth in the North American and European automotive, industrial and nuclear refurbishment markets served by the segment. This trend is expected to continue in 2017 as new capacity for control cable and sealing and insulation products enters production and relieves capacity constraints that are currently limiting revenue growth. The Company’s order backlog consists of firm customer orders only and represents the revenue the Company expects to realize on booked orders over the succeeding twelve months. The Company reports the twelve month billable backlog because it provides a leading indicator of significant changes in consolidated revenue. The order backlog at March 31, 2017 of $648 million was in line with the order backlog of $650 million at December 31, 2016. Revenue generated in the quarter from backlog orders was offset by new orders and the movement of a portion of the booked order for the Tuxpan project in Mexico that is planned for execution in the first quarter of 2018. In addition to the backlog, the Company closely monitors its bidding activity and the value of outstanding firm bids is currently in excess of $600 million. In addition, the Company has provided budgetary estimates and is currently working with customers on projects with aggregate values of approximately $1.6 billion. Although the Company cannot be certain on the timing of these projects, they do represent a diverse portfolio of opportunities to sustain and grow the backlog in 2017 and beyond. The following table sets forth revenue by reportable operating segment for the following periods: (a) Represents the elimination of the inter-segment sales between the Pipeline and Pipe Services segment and the Petrochemical and Industrial segment. Consolidated revenue increased 9%, or $30.6 million, from $329.2 million during the fourth quarter of 2016 to $359.7 million during the first quarter of 2017, due to increases of $22.8 million in the Pipeline and Pipe Services segment and $8.0 million in the Petrochemical and Industrial segment. Revenue increased by 8% in the Pipeline and Pipe Services segment, or $22.8 million, from $286.2 million in the fourth quarter of 2016 to $309.0 million in the first quarter of 2017, due to higher activity levels in Asia Pacific, Latin America and North America, partially offset by lower volumes in the Europe, Middle East, Africa and Russia ("EMAR") region. See Section 3.1 – Pipeline and Pipe Services Segment for additional disclosure with respect to the change in revenue in the Pipeline and Pipe Services segment. In the Petrochemical and Industrial segment, revenue was higher by $8.0 million, or 19%, in the first quarter of 2017, compared to the fourth quarter of 2016, due to higher activity levels in all regions. See Section 3.2 – Petrochemical and Industrial Segment for additional disclosure with respect to the change in revenue in the Petrochemical and Industrial segment. Consolidated revenue decreased by $5.8 million, or 2%, from $365.6 million during the first quarter of 2016, to $359.7 million during the first quarter of 2017, due to a decrease of $7.9 million in the Pipeline and Pipe Services segment, partially offset by a $2.5 million increase in the Petrochemical and Industrial segment. In the Pipeline and Pipe Services segment, revenue in the first quarter of 2017 was $309.0 million, or 3% lower than in the first quarter of 2016, due to decreased activity levels in EMAR, partially offset by higher activity levels in North America, Latin America and Asia Pacific. See Section 3.1 – Pipeline and Pipe Services Segment for additional disclosure with respect to the change in revenue in the Pipeline and Pipe Services segment. In the Petrochemical and Industrial segment, revenue increased by $2.5 million, or 5%, during the first quarter of 2017, compared to the first quarter of 2016, due to increased activity levels in all regions. See Section 3.2 – Petrochemical and Industrial Segment for additional disclosure with respect to the change in revenue in the Petrochemical and Industrial segment. The following table sets forth operating income and operating margin for the following periods: (a) Operating margin is defined as operating income divided by revenue and is a non-GAAP measure. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. Operating income increased by $4.1 million, from an operating income of $21.7 million during the fourth quarter of 2016 to operating income of $25.8 million in the first quarter of 2017. Operating income was positively impacted by increases in gross profit of $22.0 million. This was partially offset by an increase in selling, general and administrative ("SG&A") expenses of $7.3 million, a $1.3 million increase in research and development expenses, a $2.8 million increase in net foreign exchange losses and a $5.6 million in gain on sale of land recorded in the fourth quarter of 2016. The increase in gross profit resulted from the higher revenue, as explained above, and a 3.3 percentage point increase in the gross margin from the fourth quarter of 2016. The increase in the gross margin percentage was primarily due to product and project mix, labour cost efficiencies due to higher facility utilization and increased absorption of manufacturing overheads and a $4.8 million reduction in the carrying value of inventory recorded in the fourth quarter of 2016. SG&A expenses increased by $7.3 million, from $71.8 million in the fourth quarter of 2016 to $79.0 million in the first quarter of 2017, primarily due to an increase in personnel related and management incentive compensation expenses of $4.6 million and an increase of $5.7 million due to reductions in provisions for import duties and decommissioning obligations recorded in the fourth quarter of 2016. This was partially offset by a $3.0 million reduction in warranty provisions and professional fees. Operating income increased by $9.9 million, from an operating income of $16.0 million in the first quarter of 2016 to an operating income of $25.8 million during the first quarter of 2017. Operating income was impacted by an increase in gross profit of $2.7 million, decreases of $4.8 million in SG&A expenses, $0.7 million in research and development expenses, $1.4 million in amortization of property, plant, equipment and intangible assets and $0.3 million in net foreign exchange losses. The increase in gross profit resulted from a 1.3 percentage point increase in gross margin, partially offset by the lower revenue, as explained above. The increase in the gross margin percentage was primarily attributable to product and project mix. SG&A expenses in the first quarter of 2017 decreased by $4.8 million compared to the first quarter of 2016, primarily due to a $3.6 million reduction in personnel related expenses, a $1.8 million decrease in professional fees, a decrease in rental related expenses for facilities of $2.4 million and a net reduction in other costs of $1.4 million. Partially offsetting these expense reductions was an increase in management incentive compensation expenses of $4.4 million. The following table sets forth the components of finance costs, net for the following periods: In the first quarter of 2017, net finance costs were $5.6 million, compared to a net finance cost of $2.9 million during the fourth quarter of 2016. The increase in net finance costs was due to a decrease in interest income of $1.8 million on short term deposits and other receivables, a $0.4 million increase in interest expense on long term debt and higher interest on bank borrowings and facilities of $0.6 million. In the first quarter of 2017, net finance costs were $5.6 million, compared to a net finance cost of $4.7 million during the first quarter of 2016. The increase in net finance costs was primarily a result of higher interest expense on bank borrowings and facilities. The following table sets forth the income tax expenses for the following periods: The Company recorded an income tax expense of $2.5 million (14% of income before income taxes) in the first quarter of 2017, compared to an income tax expense of $7.0 million (20% of income before income taxes) in the fourth quarter of 2016. The effective tax rate in the first quarter of 2017 was lower than the expected income tax rate of 27% primarily due to a portion of the Company’s taxable income being earned in lower tax jurisdictions and losses being generated in higher tax jurisdictions. The Company recorded an income tax expense of $2.5 million (14% of income before income taxes) in the first quarter of 2017, compared to an income tax expense of $2.6 million (24% of income before income taxes) in the first quarter of 2016. The effective tax rate in the first quarter of 2017 was lower than the expected income tax rate of 27% primarily due to a portion of the Company’s taxable income being earned in lower tax jurisdictions and losses being generated in higher tax jurisdictions. The following table sets forth the significant currencies in which the Company operates and the average foreign exchange rates for these currencies versus Canadian dollars, for the following periods: The following table sets forth the impact on revenue, operating income and net income (attributable to shareholders of the Company), compared with the prior quarter and the prior year period, as a result of foreign exchange fluctuations on the translation of foreign currency operations: In addition to the translation impact noted above, the Company recorded a foreign exchange loss of $1.4 million in the first quarter of 2017, compared to a foreign exchange loss of $1.7 million for the comparable period in the prior year, as a result of the impact of changes in foreign exchange rates on monetary assets and liabilities and short term foreign currency intercompany loans within the group, net of hedging activities. 2.6  Net Income (attributable to shareholders of the Company) Net income decreased by $12.1 million, from a net income of $27.3 million during the fourth quarter of 2016 to a net income of $15.1 million during the first quarter of 2017. This was mainly due to a $19.2 million arbitration award against Wasco Energy recorded in the fourth quarter of 2016 and a $2.8 million increase in finance costs.  This was partially offset by the $4.1 million increase in operating income, as explained in section 2.2 above, and a $4.4 million decrease in income tax expense. Net income increased by $7.7 million, from $7.5 million during the first quarter of 2016 to $15.1 million during the first quarter of 2017. This was mainly due to the $9.9 million increase in operating income, as explained in section 2.2 above. This was partially offset by a $0.9 increase in finance costs and a $2.0 million higher loss from investments in associates. The following table sets forth, by geographic location, the revenue, operating income and operating margin for the Pipeline and Pipe Services segment for the following periods: (a) Operating margin is defined as operating income divided by revenue and is a non-GAAP measure. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. Revenue in the first quarter of 2017 increased by $22.8 million to $309.0 million, from $286.2 million in the fourth quarter of 2016. Revenue benefitted from higher activity levels in Asia Pacific, Latin America and North America, partially offset by lower volumes in EMAR: In the first quarter of 2017, operating income was $24.6 million compared to an operating income of $11.7 million in the fourth quarter of 2016, an increase of $12.9 million. The increase in operating income was primarily due to the $18.3 million increase in gross profit due to the increase in revenue, as explained above, and a 3.5 percentage point increase in gross margin. The increase in gross margin was due to favourable project mix, labour efficiencies due to higher facility utilization and increased manufacturing overhead absorption and a $4.8 million reduction in the carrying value of inventory recorded in the fourth quarter of 2016. This was partially offset by higher SG&A expenses, explained in section 2.2 above, and the $5.6 million gain on sale of land recorded in the fourth quarter of 2016. Revenue in the first quarter of 2017 was $309.0 million, a decrease of $7.9 million, or 3%, from $317.0 million in the comparable period of 2016. Segment revenue was adversely affected by the impact on translation of foreign operations, as noted in section 2.5 above, and lower activity levels in EMAR, partially offset by higher revenue in North America, Latin America and Asia Pacific: In the first quarter of 2017, operating income was $24.6 million compared to $16.2 million in the first quarter of 2016, an increase of $8.4 million. This increase was attributable primarily to a reduction in SG&A expenses, decreases in research and development expenses and amortization of property, plant, equipment and intangible assets, as explained in section 2.2 above. This was partially offset by a reduction in gross profit of $1.1 million as a result of a decrease in revenue of $7.9 million, as explained above, partially offset by a 0.5 percentage point increase in gross margin. The increase in gross margin was due to favourable project mix. The following table sets forth, by geographic location, the revenue, operating income and operating margin for the Petrochemical and Industrial segment for the following periods: (a) Operating margin is defined as operating income divided by revenue and is a non-GAAP measure. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. In the first quarter of 2017, revenue increased by $8.0 million, or 19%, to $51.4 million, compared to the fourth quarter of 2016, primarily due to increased shipments of heat shrink tubing product, particularly in the automotive sector, and higher activity levels for wire and cable products. Operating income of $9.6 million in the first quarter of 2017 was $3.4 million, or 54%, higher than in the fourth quarter of 2016. The increase in operating income was primarily due to an increase in gross profit of $3.6 million due to the increased revenue, as explained above, and a 2.4 percentage point increase in gross margin. The increase in gross margin was due to favourable product mix and labour efficiencies due to higher facility utilization and increased manufacturing overhead absorption. Revenue in the first quarter of 2017 increased by $2.5 million, or 5%, compared to the first quarter of 2016. Revenue was impacted by increased shipments of heat shrink tubing product, particularly in the automotive sector, and by higher activity levels for wire and cable products. Operating income in the first quarter of 2017 was $9.6 million compared to $7.6 million in the first quarter of 2016, an increase of $2.1 million, or 27%. The increase in operating income was primarily due to an increase in gross profit of $2.7 million as a result of an increase in revenue of $2.5 million, as explained above, and a 4.0 percentage point increase in gross margin. The increase in gross margin was due to favourable product mix and labour efficiencies due to higher facility utilization and increased manufacturing overhead absorption. Financial and corporate costs include corporate expenses not allocated to the operating segments and other non-operating items, including foreign exchange gains and losses on foreign currency denominated cash and working capital balances. The corporate division of the Company only earns revenue that is considered incidental to the activities of the Company. As a result, it does not meet the definition of a reportable operating segment as defined under IFRS. The following table sets forth the Company’s unallocated financial and corporate expenses, before foreign exchange gains and losses, for the following periods: Financial and corporate costs increased by $3.8 million from $3.2 million during the fourth quarter of 2016 to $7.0 million in the first quarter of 2017. The increase was primarily due to an increase in personnel related and management incentive compensation expenses of $2.0 million. In addition, in the fourth quarter of 2016, $1.5 million in provisions for pension expense and professional fees were reversed. Financial and corporate costs increased by $0.9 million from the first quarter of 2016 to $7.0 million in the first quarter of 2017. The increase was primarily due to higher personnel related and stock based and long term management incentive expenses of $2.6 million. This was partially offset by a $1.5 million decrease in professional consulting and legal fees. This document includes certain statements that reflect management’s expectations and objectives for the Company’s future performance, opportunities and growth, which statements constitute “forward‑looking information” and “forward looking statements” (collectively “forward looking information”) under applicable securities laws.  Such statements, other than statements of historical fact, are predictive in nature or depend on future events or conditions. Forward looking information involves estimates, assumptions, judgments and uncertainties.  These statements may be identified by the use of forward‑looking terminology such as "may", "will", "should", "anticipate", "expect", "believe", "predict", "estimate", "continue", "intend", "plan" and variations of these words or other similar expressions.  Specifically, this document includes forward looking information in the Outlook section and elsewhere in respect of, among other things, the achievement of key performance objectives, the incurrence of additional capital expenditures as necessary to respond to market demand growth and to facilitate growth in new markets, the increase in investment in net working capital, the timing of major project activity, the expected improvement in consolidated revenues and earnings in 2017 from 2016, the growth in revenue and earnings in the Pipeline and Pipe Services segment and in the Petrochemical and Industrial segment of the Company’s business, the sufficiency of resources, capacity and capital to meet market demand, to meet contractual obligations and to execute the Company’s development and growth strategy, the impact of the existing order backlog and other factors on the Company’s revenue and operating income, the impact of global economic activity on the demand for the Company's products, the impact of the improvement in global oil and gas commodity prices on the level of industry investment in oil and gas infrastructure, the impact of changing energy demand, supply and prices, the impact and likelihood of changes in competitive conditions in the markets in which the Company participates, the adequacy of the Company’s existing accruals in respect of environmental compliance and in respect of litigation matters and other claims generally, the level of payments under the Company's performance bonds  and the expected development in the Company’s order backlog. Forward looking information involves known and unknown risks and uncertainties that could cause actual results to differ materially from those predicted by the forward‑looking information.  We caution readers not to place undue reliance on forward looking information as a number of factors could cause actual events, results and prospects to differ materially from those expressed in or implied by the forward looking information.  Significant risks facing the Company include, but are not limited to: the impact on the Company of reduced demand for its products and services, including the suspension or cancellation of existing contracts, as a result of lower investment in global oil and gas extraction and transportation activity following the previous declines in the global price of oil and gas, long term changes in global or regional economic activity and changes in energy supply and demand, which impact on the level of global pipeline infrastructure construction; exposure to product and other liability claims; shortages of or significant increases in the prices of raw materials used by the Company; compliance with environmental, trade and other laws; political, economic and other risks arising from the Company’s international operations; and fluctuations in foreign exchange rates. These statements of forward looking information are based on assumptions, estimates and analysis made by management in light of its experience and perception of trends, current conditions and expected developments as well as other factors believed to be reasonable and relevant in the circumstances.  These assumptions include those in respect of global oil and gas prices, increases in expenditures on natural gas infrastructures, modest global economic growth,  the Company’s ability to execute projects under contract, the continued supply of and stable pricing for commodities used by the Company, the availability of personnel resources sufficient for the Company to operate its businesses, the maintenance of operations in major oil and gas producing regions and the ability of the Company to satisfy all covenants under its Credit Facilities and the Senior Notes. The Company believes that the expectations reflected in the forward looking information are based on reasonable assumptions in light of currently available information.  However, should one or more risks materialize or should any assumptions prove incorrect, then actual results could vary materially from those expressed or implied in the forward looking information included in this document and the Company can give no assurance that such expectations will be achieved. When considering the forward looking information in making decisions with respect to the Company, readers should carefully consider the foregoing factors and other uncertainties and potential events.  The Company does not assume the obligation to revise or update forward looking information after the date of this document or to revise it to reflect the occurrence of future unanticipated events, except as may be required under applicable securities laws. To the extent any forward looking information in this document constitutes future oriented financial information or financial outlooks, within the meaning of securities laws, such information is being provided to demonstrate the potential of the Company and readers are cautioned that this information may not be appropriate for any other purpose. Future oriented financial information and financial outlooks, as with forward looking information generally, are based on the assumptions and subject to the risks noted above. Shawcor will be hosting a Shareholder and Analyst Conference Call and Webcast on Wednesday May 10th, 2017 at 10:00AM ET, which will discuss the Company’s Fourth Quarter Financial Results. To participate via telephone, please dial 1-877-776-4039 or 1-315-625-6955 and enter passcode 7617759; alternatively, please go to the following website address to participate via webcast: http://edge.media-server.com/m/p/rc2fpb5y/ Additional information relating to the Company, including its Annual Information Form, is available on SEDAR at www.sedar.com. Please visit our website at www.shawcor.com for further details. The Company reports on certain non-GAAP measures that are used to evaluate its performance and segments, as well as to determine compliance with debt covenants and to manage the capital structure. These non-GAAP measures do not have standardized meanings under IFRS and are not necessarily comparable to similar measures provided by other companies.  The Company discloses these measures because it believes that they provide further information and assist readers in understanding the results of the Company’s operations and financial position. These measures should not be considered in isolation or used in substitution for other measures of performance prepared in accordance with GAAP.  The following is a reconciliation of the non-GAAP measures reported by the Company.                EBITDA and Adjusted EBITDA EBITDA is a non-GAAP measure defined as earnings before interest, income taxes, depreciation and amortization.  Adjusted EBITDA is also a non-GAAP measure defined as EBITDA adjusted for non-operational items. The Company believes that EBITDA and Adjusted EBITDA are useful supplemental measures that provide a meaningful indication of the Company's results from principal business activities prior to the consideration of how these activities are financed or the tax impacts in various jurisdictions. The Company presents Adjusted EBITDA as a measure of EBITDA that excludes the impact of transactions that are outside the Company’s normal course of business. (a) Adjusted EBITDA and EBITDA are used by many analysts in the oil and gas industry as one of several important analytical tools.


News Article | May 9, 2017
Site: www.theenergycollective.com

A global group of 30 leading institutional investors coordinated by the PRI (Principles for Responsible Investment) has announced a new initiative that will encourage oil and gas companies, including gas utilities, around the world to initiate or improve efforts to measure, report, and reduce methane emissions. The move is the latest evidence that investors are concerned with the financial, reputational and environmental risks associated with unmonitored and unchecked methane venting and leakage. Methane is a potent greenhouse gas with over 80 times the warming power of carbon dioxide over a 20-year timeframe. It’s responsible for about 25% of the warming our planet is experiencing today. Globally, the oil and gas industry is among the largest man-made sources of methane. Methane is also the main ingredient in the natural gas, the product that major global producers have marketed to investors as central to their growth in the years ahead. Companies tout gas as a clean, low-carbon fuel, ignoring the vast amounts of unburned methane escaping from their systems each year, or the lack of transparency with regard to monitoring and reduction strategies. The owners and asset managers involved in the PRI’s methane initiative oversee more than $3 trillion. They are global in scope, representing a dozen countries across North America, Europe and Asia-Pacific. PRI plans to engage 29 companies on four continents, from across the natural gas supply chain (the names aren’t being made public). They will be urging greater transparency and stronger, more concrete actions, including setting methane targets and participating responsibly on methane policy. A centerpiece of PRI’s ongoing efforts to improve companies’ methane management and disclosure will be the Investor’s Guide to Methane, published jointly with EDF last fall. PRI’s global methane initiative complements ongoing U.S. engagement efforts on methane led by the Interfaith Center on Corporate Responsibility and CERES. This is an uncertain time for the methane issue globally. On the one hand, President Trump and many U.S. lawmakers are trying to roll back methane policies established during the Obama administration. On the other, officials in Canada are expected to release draft oil and gas methane regulations this year, and similar rules are being developed in Mexico. Political backpedaling from methane controls is shortsighted and counterproductive for both industry and environment, ignoring one of the biggest and most cost-effective opportunities we have to slow the warming of our globe. But these major investors, whose long-term investment horizons require them to look beyond the short-term calculus that dominates both politics and executive compensation packages, are taking a view to match their financial stake in the industry’s future. What they see is a growing liability for an industry looking to the production and delivery of natural gas a growth engine over the coming decades. The problem isn’t going to go away, no matter what they’re saying in Washington. Producers like BP, Shell and Chevron routinely cite rising global demand for natural gas as a primary driver of growth and valuation. But in markets for new electric generating capacity, natural gas is increasingly competing on a cost basis with clean, renewable sources like wind and solar. Failure to deliver on its frequent promises to deliver a more climate-friendly energy choice puts the gas industry and its investors at risk. That makes methane the key variable. Conservative estimates are that, worldwide, companies are releasing at least 3.5 trillion cubic feet of methane to the atmosphere each year. That’s about the same amount as all the gas sold by Norway – the world’s seventh largest producer. Besides being a huge climate problem, it’s also a huge waste of a valuable product, and perhaps an indicator that attention to the integrity of operations is not as great as what companies claim. Concern about methane isn’t limited to oil and gas investors. There’s growing awareness within the industry itself that methane poses a reputational risk, sparking some companies to start addressing the challenge. For example, 10 of the world’s largest oil and gas companies – BG Group, BP, Eni, Pemex, Reliance Industries, Repsol, Saudi Aramco, Shell, Statoil and Total – recently launched the Oil and Gas Climate Initiative (OGCI), a billion-dollar investment to accelerate commercial deployment of low carbon energy technologies. Their primary focus will be carbon capture and storage and reducing oil and gas methane emissions. Similarly, the Oil and Gas Methane Partnership (OGMP), a voluntary effort to improve emissions reporting and accelerate best methane reduction practices recently issued its first annual report, detailing emissions found in nine key source categories throughout individual operator’s systems. Launched in 2014, participating companies include BP, Eni, Pemex, PTT, Repsol, Southwestern Energy, Statoil, and Total. These are crucial first steps for the industry, and is a sign that companies looking for ways to adapt to the changing climate surrounding its business. But the industry still has a very long way to go. Fixing the problem could yield huge benefits: A 45% reduction in global oil and gas methane emissions would have roughly the same climate impact over 20 years as closing one-third of the world’s coal fired power plants. Investor calls for action on methane are quickening and now industry needs to show shareholders it will take the necessary steps to deliver on the low-carbon fuel promise of natural gas. Investors want to invest in well-run companies with good governance, and increasingly look to methane as a proxy for efficient operations. As company executives think about how to attract capital, they will be well-served to note this emerging dynamic and proactively get ahead of the issue.


Nanyang Technological University, Singapore (NTU Singapore) and Thailand's PTT Global Chemical (PTTGC) will collaborate to develop advanced 3D printing materials for the next-generation automotive industry. PTTGC is Thailand's largest petrochemical and refining company. With eight main business lines, it focuses on investing into the expansion of specialties chemical products and green chemicals. A top-ranked university, NTU is renowned for its research-intensive interdisciplinary approach in developing innovative solutions for industry and society. NTU and PTTGC aim to jointly develop new materials that could be used to 3D print vehicle components to improve fuel efficiency and reduce carbon dioxide emissions, fostering sustainable growth. The two partners signed a Memorandum of Understanding today in Bangkok, Thailand. NTU's signatory, Professor Lam Khin Yong, Chief of Staff and Vice President (Research), said, "This partnership is very timely, especially when many countries are developing advanced manufacturing technologies to make more complex components, yet with a greener carbon footprint. With the combined expertise of NTU in translational research and innovation, and the industrial application experience of PTTGC, I am sure that together we will be able to achieve new technological innovations and scientific breakthroughs." Signing on behalf of PTTGC is Mr Supattanapong Punmeechaow, President & Chief Executive Officer. "Our company is leveraging its research and development competencies as one strategic arm for growth and sustainability. Thus, we collaborate with both domestic and international external partners to attain timely commercialisation. Under the current Thailand 4.0 Policy, Thailand is moving towards an innovation-driven economy. Both PTTGC and NTU Singapore have mutual interests and complementary strengths, creating synergy for faster innovation." The two partners kicked off the partnership by inking a research collaboration agreement on the same day that details the research focus. NTU has built up its expertise in 3D printing in recent years, partnering industry leaders to develop innovative technologies in key sectors such as aerospace and defence, where it is finding more reliable ways of 3D printing aerospace components and is developing lightweight UAVs with embedded electronics. In healthcare, the university is coming up with new methods of 3D printing human tissue and medical implants, while in the marine and offshore industry it aims to develop 3D printing solutions to make it easier and cheaper to repair components of ships and rigs. The university is also looking to boost productivity in the building and construction sector, where it wants to find new ways to 3D print customised concrete structures for buildings. Professor Chua Chee Kai, Executive Director of NTU's Singapore Centre for 3D Printing, is also one of the most cited scientists in the world for 3D printing. A research-intensive public university, Nanyang Technological University, Singapore (NTU Singapore) has 33,500 undergraduate and postgraduate students in the colleges of Engineering, Business, Science, Humanities, Arts, & Social Sciences, and its Interdisciplinary Graduate School. It also has a medical school, the Lee Kong Chian School of Medicine, set up jointly with Imperial College London. NTU is also home to world-class autonomous institutes - the National Institute of Education, S Rajaratnam School of International Studies, Earth Observatory of Singapore, and Singapore Centre for Environmental Life Sciences Engineering - and various leading research centres such as the Nanyang Environment & Water Research Institute (NEWRI), Energy Research Institute @NTU (ERI@N) and the Institute on Asian Consumer Insight (ACI). Ranked 11th in the world, NTU has also been ranked the world's top young university for the last three years running. The University's main campus has been named one of the Top 15 Most Beautiful in the World. NTU also has a campus in Novena, Singapore's medical district. PTT Global Chemical Public Company Limited is strengthened with its diversity of product in both Olefins and Aromatics line, which improves its competitive advantage as well as the ability to reduce risk inherent in the petrochemical industry. A larger production scale as a result of the integration will enable the Company to leverage its significant economy of scale to reduce unit costs as well as to achieve a fully integrated production process that delivers more value-added products, especially the ability to pursue additional downstream specialties. The synergy achieved by the consolidation will also unlock greater benefits in terms of production and market optimization. PTTGC has maintained its leadership position in the "Top 10 Dow Jones Sustainability Indices (DJSI) - World Members" in the chemicals sector at the gold-class level for the fourth consecutive year. The company was recognized as "Industry Best," which reflects PTTGC's excellence in ensuring sustainability at an international level and being a role model in sustainability in business expansion throughout its supply chain. Also, PTTGC is a leading organization that identifies key 2E1S (Economic-Environmental-Social) issues considered essential for a sustainable business, enhancing value for stakeholders and building greater trust and confidence among global investors.


News Article | May 29, 2017
Site: cen.acs.org

A four-state region in Appalachia could become a petrochemical supply and manufacturing hub on par with similar hubs on the U.S. Gulf Coast. That’s the thesis of a new report from the American Chemistry Council. The trade association envisions underground cavern storage facilities and an 800-km pipeline for ethane, propane, ethylene, and propylene “along an arc stretching from Monaca, Pa., to Catlettsburg, Ky., including a spur to serve the Charleston, W.Va., area.” Driven by a surfeit of natural gas liquids from the Marcellus, Utica, and Rogersville shale formations in the northeastern U.S., the $10 billion storage hub and pipeline could create 100,000 permanent jobs by 2025, the trade group says. Included in that tally are 25,000 chemical and plastic manufacturing jobs, 43,000 supplier jobs, and 32,000 additional jobs in communities where workers spend their earnings. The report envisions five big ethylene crackers built in the Ohio River Valley. Along with them will be projects for polyethylene, other derivatives, and propane dehydrogenation. All told, the report suggests, chemical makers could invest nearly $36 billion. So far, though, the only definite project is Shell’s cracker and polyethylene plant in Monaca. PTT Global Chemical is considering a cracker in Mead Township, Ohio, but has yet to put steel in the ground. In 2015, Braskem put off a cracker and polyethylene project it was considering in West Virginia. U.S. Sens. Shelley Capito (R-W.Va.), Joe Manchin (D-W.Va.), and Rob Portman (R-Ohio) are backing the concept of a petrochemical hub. The three introduced a bill on May 9 directing the government to conduct a feasibility study of an Appalachian ethane storage hub.


News Article | May 9, 2017
Site: globenewswire.com

TORONTO, May 09, 2017 (GLOBE NEWSWIRE) -- Mr. Steve Orr, Chief Executive Officer of Shawcor Ltd. (TSX:SCL) remarked “Shawcor’s financial performance in the first quarter of 2017 continued the trend of quarter over quarter improvement since the low point that was reached in the second quarter of 2016. Results were positively impacted by excellent project execution at our Asia Pacific pipe coating facilities as well as a steady strengthening in market demand for composite pipe and downhole tubular services in North America. Also, the launch of concrete weight coating for the Sur de Texas – Tuxpan ("Tuxpan") project in Altamira, Mexico contributed approximately $20 million of revenue in the quarter.” Mr. Orr added “With production of the concrete coating work for the Tuxpan pipeline project now well underway in Altamira, Mexico, the Company expects to see a renewed acceleration in earnings growth in the second half of 2017 as the Tuxpan project reaches full production. The Company’s current order backlog at $648 million coupled with our expectation that North American well completion activity will continue to improve, provides us with confidence that Shawcor will deliver solid results in 2017. With this positive outlook and the Company’s strong balance sheet, management is in an excellent position to focus on executing our long term growth strategy.” 1 See Section 6.0 – Reconciliation of Non-GAAP Measures for further details and a reconciliation for Adjusted EBITDA. (a) EBITDA is a non-GAAP measure calculated by adding back to net income (loss) the sum of net finance costs, income taxes and amortization of property, plant, equipment and intangible assets. EBITDA does not have a standardized meaning prescribed by GAAP and is not necessarily comparable to similar measures provided by other companies. EBITDA is used by many analysts in the oil and gas industry as one of several important analytical tools. It is also considered important by lenders to the Company. It should not be considered in isolation or used as an alternative to net income or any of the other measures of performance prepared in accordance with GAAP. (b) Attributable to shareholders of the Company. Contract to Provide Pipe Coating Services for Thailand’s Fifth Transmission Pipeline Project On April 7, 2017, the Company announced that its pipe coating division had received a contract in excess of C$40 million from Marubeni-Itochu Tubulars Asia Pte Ltd, a 100% subsidiary of Marubeni-Itochu Steel Inc., to provide internal lining and three layer polyethylene anti-corrosion pipeline coatings for Thailand’s Fifth Transmission Pipeline project. This project is owned by PTT Public Company Limited, a Thai state enterprise company. The pipeline will run through 8 provinces in Thailand and is aimed at reducing risks to electrical power security and easing the delivery of gas from the LNG Terminal in Rayong, Thailand to the Western region. This contract will be executed in Shawcor's coating facilities in Malaysia, and is expected to commence in Q4 2017 and to be completed by Q4 2018. The Company believes that the decline in global oil and gas investment that followed the decrease in oil and gas prices in the second half of 2014 has reached a cycle low and is now beginning to trend towards improvement. Shawcor’s financial performance is closely correlated with oil and gas infrastructure spending and the trend towards stabilization in market demand for the Company’s products and services has enabled the Company to report quarter over quarter gains in revenue and operating income since the trough of the cycle in the second quarter of 2016. The level of improvement in market demand combined with Shawcor’s booked order backlog is expected to enable the Company to deliver solid growth in financial performance in 2017. However, the rate of improvement will vary by region. The region with the most momentum for stronger activity is North America and in particular the number of rigs operating and the number of new oil and gas wells being drilled and completed. As the rig counts in Canada and the USA have improved since early 2016, the demand for the Company’s gathering line pipeline products and services has strengthened. It is expected that increased gathering pipeline construction will lead to new transmission infrastructure investment to accommodate increased production volumes, particularly in west Texas and in the eastern USA. Internationally, economic growth in emerging markets and supportive political mandates to reduce hydrocarbon emissions in electricity generation is leading to investment in new natural gas pipeline infrastructure. Examples include the Company’s Tuxpan undersea natural gas pipeline project in Mexico and the recently awarded PTT 5th Transmission pipeline project in Thailand. These projects are not directly related to new hydrocarbon production and thus oil and gas prices are not determinative in the project investment decision. As a result, the projects are proceeding now at an early stage of the new capital investment cycle. In contrast to natural gas demand driven projects, oil and gas greenfield development projects that enable new hydrocarbon production as well as smaller production sustaining capital projects are lagging as national and international oil companies continue to limit commitments for new projects to ensure that capital spending is in line with reduced operating cash flow. However, capital investments will eventually be required to offset depleting production with resulting growth in demand for Shawcor’s international products and services beyond 2017. Further detail on the outlook for the Pipeline and Pipe Services segment by region and in the Petrochemical and Industrial segment is set out below. Market demand in Shawcor’s North American Pipeline segment businesses is closely tied to well completion activity in North America which drives the demand for small diameter pipe coating and joint protection, composite pipe for gathering line applications, OCTG pipe inspection and refurbishment and gathering line girth weld inspection. Demand for these products and services is expected to fluctuate with changes in global oil and gas prices and the resulting volume of wells drilled and completed. A persistent improvement in drilling rig counts in North America since the second quarter of 2016 has enabled a modest improvement in revenue for Shawcor’s North American Pipeline segment businesses and this trend is expected to continue in 2017. Beyond 2017, the Company expects that the North American Pipeline and Pipe Services segment will benefit from the build of new pipeline infrastructure in the form of tie-back infrastructure in the Gulf of Mexico and new onshore large diameter transmission lines to support increasing production of shale oil and the export of natural gas to Mexico and internationally through LNG. With the launch of concrete weight coating operations in Altamira, Mexico on the Tuxpan project, the Company expects revenue in the Latin America Pipeline segment region to provide strong growth with full production from the two mobile plants expected to be reached by the end of the second quarter. At March 31, 2017, the Company has booked revenue relating to the Tuxpan project included in the backlog of approximately $340 million to be executed from the second quarter of 2017 to the first quarter of 2018. Shawcor’s EMAR Pipeline segment region has been the Company’s region most impacted by the continued deferral of capital spending on new pipeline infrastructure by national and international oil companies. Although project engineering and bidding activity remains very strong in the region, and the Company is pursuing significant revenue opportunities for girth weld inspection, pipeline joint protection and pipe end preservation on both the Turk Stream and Nord Stream 2 pipelines, these opportunities are not likely to benefit revenue until 2018 or later. The Company’s Asia Pacific region has benefited over the past two quarters from the execution of the flow assurance work for the Shah Deniz project and the anti-corrosion coating for pipe destined for Mexico for the Tuxpan project. With the region’s involvement in the coating of these projects now complete, revenue will decrease as project activity will be limited until the PTT 5th Transmission pipeline project commences later in the year. Shawcor’s Petrochemical and Industrial segment businesses continue to deliver steady growth in revenue and earnings based on consistent demand growth in the North American and European automotive, industrial and nuclear refurbishment markets served by the segment. This trend is expected to continue in 2017 as new capacity for control cable and sealing and insulation products enters production and relieves capacity constraints that are currently limiting revenue growth. The Company’s order backlog consists of firm customer orders only and represents the revenue the Company expects to realize on booked orders over the succeeding twelve months. The Company reports the twelve month billable backlog because it provides a leading indicator of significant changes in consolidated revenue. The order backlog at March 31, 2017 of $648 million was in line with the order backlog of $650 million at December 31, 2016. Revenue generated in the quarter from backlog orders was offset by new orders and the movement of a portion of the booked order for the Tuxpan project in Mexico that is planned for execution in the first quarter of 2018. In addition to the backlog, the Company closely monitors its bidding activity and the value of outstanding firm bids is currently in excess of $600 million. In addition, the Company has provided budgetary estimates and is currently working with customers on projects with aggregate values of approximately $1.6 billion. Although the Company cannot be certain on the timing of these projects, they do represent a diverse portfolio of opportunities to sustain and grow the backlog in 2017 and beyond. The following table sets forth revenue by reportable operating segment for the following periods: (a) Represents the elimination of the inter-segment sales between the Pipeline and Pipe Services segment and the Petrochemical and Industrial segment. Consolidated revenue increased 9%, or $30.6 million, from $329.2 million during the fourth quarter of 2016 to $359.7 million during the first quarter of 2017, due to increases of $22.8 million in the Pipeline and Pipe Services segment and $8.0 million in the Petrochemical and Industrial segment. Revenue increased by 8% in the Pipeline and Pipe Services segment, or $22.8 million, from $286.2 million in the fourth quarter of 2016 to $309.0 million in the first quarter of 2017, due to higher activity levels in Asia Pacific, Latin America and North America, partially offset by lower volumes in the Europe, Middle East, Africa and Russia ("EMAR") region. See Section 3.1 – Pipeline and Pipe Services Segment for additional disclosure with respect to the change in revenue in the Pipeline and Pipe Services segment. In the Petrochemical and Industrial segment, revenue was higher by $8.0 million, or 19%, in the first quarter of 2017, compared to the fourth quarter of 2016, due to higher activity levels in all regions. See Section 3.2 – Petrochemical and Industrial Segment for additional disclosure with respect to the change in revenue in the Petrochemical and Industrial segment. Consolidated revenue decreased by $5.8 million, or 2%, from $365.6 million during the first quarter of 2016, to $359.7 million during the first quarter of 2017, due to a decrease of $7.9 million in the Pipeline and Pipe Services segment, partially offset by a $2.5 million increase in the Petrochemical and Industrial segment. In the Pipeline and Pipe Services segment, revenue in the first quarter of 2017 was $309.0 million, or 3% lower than in the first quarter of 2016, due to decreased activity levels in EMAR, partially offset by higher activity levels in North America, Latin America and Asia Pacific. See Section 3.1 – Pipeline and Pipe Services Segment for additional disclosure with respect to the change in revenue in the Pipeline and Pipe Services segment. In the Petrochemical and Industrial segment, revenue increased by $2.5 million, or 5%, during the first quarter of 2017, compared to the first quarter of 2016, due to increased activity levels in all regions. See Section 3.2 – Petrochemical and Industrial Segment for additional disclosure with respect to the change in revenue in the Petrochemical and Industrial segment. The following table sets forth operating income and operating margin for the following periods: (a) Operating margin is defined as operating income divided by revenue and is a non-GAAP measure. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. Operating income increased by $4.1 million, from an operating income of $21.7 million during the fourth quarter of 2016 to operating income of $25.8 million in the first quarter of 2017. Operating income was positively impacted by increases in gross profit of $22.0 million. This was partially offset by an increase in selling, general and administrative ("SG&A") expenses of $7.3 million, a $1.3 million increase in research and development expenses, a $2.8 million increase in net foreign exchange losses and a $5.6 million in gain on sale of land recorded in the fourth quarter of 2016. The increase in gross profit resulted from the higher revenue, as explained above, and a 3.3 percentage point increase in the gross margin from the fourth quarter of 2016. The increase in the gross margin percentage was primarily due to product and project mix, labour cost efficiencies due to higher facility utilization and increased absorption of manufacturing overheads and a $4.8 million reduction in the carrying value of inventory recorded in the fourth quarter of 2016. SG&A expenses increased by $7.3 million, from $71.8 million in the fourth quarter of 2016 to $79.0 million in the first quarter of 2017, primarily due to an increase in personnel related and management incentive compensation expenses of $4.6 million and an increase of $5.7 million due to reductions in provisions for import duties and decommissioning obligations recorded in the fourth quarter of 2016. This was partially offset by a $3.0 million reduction in warranty provisions and professional fees. Operating income increased by $9.9 million, from an operating income of $16.0 million in the first quarter of 2016 to an operating income of $25.8 million during the first quarter of 2017. Operating income was impacted by an increase in gross profit of $2.7 million, decreases of $4.8 million in SG&A expenses, $0.7 million in research and development expenses, $1.4 million in amortization of property, plant, equipment and intangible assets and $0.3 million in net foreign exchange losses. The increase in gross profit resulted from a 1.3 percentage point increase in gross margin, partially offset by the lower revenue, as explained above. The increase in the gross margin percentage was primarily attributable to product and project mix. SG&A expenses in the first quarter of 2017 decreased by $4.8 million compared to the first quarter of 2016, primarily due to a $3.6 million reduction in personnel related expenses, a $1.8 million decrease in professional fees, a decrease in rental related expenses for facilities of $2.4 million and a net reduction in other costs of $1.4 million. Partially offsetting these expense reductions was an increase in management incentive compensation expenses of $4.4 million. The following table sets forth the components of finance costs, net for the following periods: In the first quarter of 2017, net finance costs were $5.6 million, compared to a net finance cost of $2.9 million during the fourth quarter of 2016. The increase in net finance costs was due to a decrease in interest income of $1.8 million on short term deposits and other receivables, a $0.4 million increase in interest expense on long term debt and higher interest on bank borrowings and facilities of $0.6 million. In the first quarter of 2017, net finance costs were $5.6 million, compared to a net finance cost of $4.7 million during the first quarter of 2016. The increase in net finance costs was primarily a result of higher interest expense on bank borrowings and facilities. The following table sets forth the income tax expenses for the following periods: The Company recorded an income tax expense of $2.5 million (14% of income before income taxes) in the first quarter of 2017, compared to an income tax expense of $7.0 million (20% of income before income taxes) in the fourth quarter of 2016. The effective tax rate in the first quarter of 2017 was lower than the expected income tax rate of 27% primarily due to a portion of the Company’s taxable income being earned in lower tax jurisdictions and losses being generated in higher tax jurisdictions. The Company recorded an income tax expense of $2.5 million (14% of income before income taxes) in the first quarter of 2017, compared to an income tax expense of $2.6 million (24% of income before income taxes) in the first quarter of 2016. The effective tax rate in the first quarter of 2017 was lower than the expected income tax rate of 27% primarily due to a portion of the Company’s taxable income being earned in lower tax jurisdictions and losses being generated in higher tax jurisdictions. The following table sets forth the significant currencies in which the Company operates and the average foreign exchange rates for these currencies versus Canadian dollars, for the following periods: The following table sets forth the impact on revenue, operating income and net income (attributable to shareholders of the Company), compared with the prior quarter and the prior year period, as a result of foreign exchange fluctuations on the translation of foreign currency operations: In addition to the translation impact noted above, the Company recorded a foreign exchange loss of $1.4 million in the first quarter of 2017, compared to a foreign exchange loss of $1.7 million for the comparable period in the prior year, as a result of the impact of changes in foreign exchange rates on monetary assets and liabilities and short term foreign currency intercompany loans within the group, net of hedging activities. 2.6  Net Income (attributable to shareholders of the Company) Net income decreased by $12.1 million, from a net income of $27.3 million during the fourth quarter of 2016 to a net income of $15.1 million during the first quarter of 2017. This was mainly due to a $19.2 million arbitration award against Wasco Energy recorded in the fourth quarter of 2016 and a $2.8 million increase in finance costs.  This was partially offset by the $4.1 million increase in operating income, as explained in section 2.2 above, and a $4.4 million decrease in income tax expense. Net income increased by $7.7 million, from $7.5 million during the first quarter of 2016 to $15.1 million during the first quarter of 2017. This was mainly due to the $9.9 million increase in operating income, as explained in section 2.2 above. This was partially offset by a $0.9 increase in finance costs and a $2.0 million higher loss from investments in associates. The following table sets forth, by geographic location, the revenue, operating income and operating margin for the Pipeline and Pipe Services segment for the following periods: (a) Operating margin is defined as operating income divided by revenue and is a non-GAAP measure. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. Revenue in the first quarter of 2017 increased by $22.8 million to $309.0 million, from $286.2 million in the fourth quarter of 2016. Revenue benefitted from higher activity levels in Asia Pacific, Latin America and North America, partially offset by lower volumes in EMAR: In the first quarter of 2017, operating income was $24.6 million compared to an operating income of $11.7 million in the fourth quarter of 2016, an increase of $12.9 million. The increase in operating income was primarily due to the $18.3 million increase in gross profit due to the increase in revenue, as explained above, and a 3.5 percentage point increase in gross margin. The increase in gross margin was due to favourable project mix, labour efficiencies due to higher facility utilization and increased manufacturing overhead absorption and a $4.8 million reduction in the carrying value of inventory recorded in the fourth quarter of 2016. This was partially offset by higher SG&A expenses, explained in section 2.2 above, and the $5.6 million gain on sale of land recorded in the fourth quarter of 2016. Revenue in the first quarter of 2017 was $309.0 million, a decrease of $7.9 million, or 3%, from $317.0 million in the comparable period of 2016. Segment revenue was adversely affected by the impact on translation of foreign operations, as noted in section 2.5 above, and lower activity levels in EMAR, partially offset by higher revenue in North America, Latin America and Asia Pacific: In the first quarter of 2017, operating income was $24.6 million compared to $16.2 million in the first quarter of 2016, an increase of $8.4 million. This increase was attributable primarily to a reduction in SG&A expenses, decreases in research and development expenses and amortization of property, plant, equipment and intangible assets, as explained in section 2.2 above. This was partially offset by a reduction in gross profit of $1.1 million as a result of a decrease in revenue of $7.9 million, as explained above, partially offset by a 0.5 percentage point increase in gross margin. The increase in gross margin was due to favourable project mix. The following table sets forth, by geographic location, the revenue, operating income and operating margin for the Petrochemical and Industrial segment for the following periods: (a) Operating margin is defined as operating income divided by revenue and is a non-GAAP measure. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. In the first quarter of 2017, revenue increased by $8.0 million, or 19%, to $51.4 million, compared to the fourth quarter of 2016, primarily due to increased shipments of heat shrink tubing product, particularly in the automotive sector, and higher activity levels for wire and cable products. Operating income of $9.6 million in the first quarter of 2017 was $3.4 million, or 54%, higher than in the fourth quarter of 2016. The increase in operating income was primarily due to an increase in gross profit of $3.6 million due to the increased revenue, as explained above, and a 2.4 percentage point increase in gross margin. The increase in gross margin was due to favourable product mix and labour efficiencies due to higher facility utilization and increased manufacturing overhead absorption. Revenue in the first quarter of 2017 increased by $2.5 million, or 5%, compared to the first quarter of 2016. Revenue was impacted by increased shipments of heat shrink tubing product, particularly in the automotive sector, and by higher activity levels for wire and cable products. Operating income in the first quarter of 2017 was $9.6 million compared to $7.6 million in the first quarter of 2016, an increase of $2.1 million, or 27%. The increase in operating income was primarily due to an increase in gross profit of $2.7 million as a result of an increase in revenue of $2.5 million, as explained above, and a 4.0 percentage point increase in gross margin. The increase in gross margin was due to favourable product mix and labour efficiencies due to higher facility utilization and increased manufacturing overhead absorption. Financial and corporate costs include corporate expenses not allocated to the operating segments and other non-operating items, including foreign exchange gains and losses on foreign currency denominated cash and working capital balances. The corporate division of the Company only earns revenue that is considered incidental to the activities of the Company. As a result, it does not meet the definition of a reportable operating segment as defined under IFRS. The following table sets forth the Company’s unallocated financial and corporate expenses, before foreign exchange gains and losses, for the following periods: Financial and corporate costs increased by $3.8 million from $3.2 million during the fourth quarter of 2016 to $7.0 million in the first quarter of 2017. The increase was primarily due to an increase in personnel related and management incentive compensation expenses of $2.0 million. In addition, in the fourth quarter of 2016, $1.5 million in provisions for pension expense and professional fees were reversed. Financial and corporate costs increased by $0.9 million from the first quarter of 2016 to $7.0 million in the first quarter of 2017. The increase was primarily due to higher personnel related and stock based and long term management incentive expenses of $2.6 million. This was partially offset by a $1.5 million decrease in professional consulting and legal fees. This document includes certain statements that reflect management’s expectations and objectives for the Company’s future performance, opportunities and growth, which statements constitute “forward‑looking information” and “forward looking statements” (collectively “forward looking information”) under applicable securities laws.  Such statements, other than statements of historical fact, are predictive in nature or depend on future events or conditions. Forward looking information involves estimates, assumptions, judgments and uncertainties.  These statements may be identified by the use of forward‑looking terminology such as "may", "will", "should", "anticipate", "expect", "believe", "predict", "estimate", "continue", "intend", "plan" and variations of these words or other similar expressions.  Specifically, this document includes forward looking information in the Outlook section and elsewhere in respect of, among other things, the achievement of key performance objectives, the incurrence of additional capital expenditures as necessary to respond to market demand growth and to facilitate growth in new markets, the increase in investment in net working capital, the timing of major project activity, the expected improvement in consolidated revenues and earnings in 2017 from 2016, the growth in revenue and earnings in the Pipeline and Pipe Services segment and in the Petrochemical and Industrial segment of the Company’s business, the sufficiency of resources, capacity and capital to meet market demand, to meet contractual obligations and to execute the Company’s development and growth strategy, the impact of the existing order backlog and other factors on the Company’s revenue and operating income, the impact of global economic activity on the demand for the Company's products, the impact of the improvement in global oil and gas commodity prices on the level of industry investment in oil and gas infrastructure, the impact of changing energy demand, supply and prices, the impact and likelihood of changes in competitive conditions in the markets in which the Company participates, the adequacy of the Company’s existing accruals in respect of environmental compliance and in respect of litigation matters and other claims generally, the level of payments under the Company's performance bonds  and the expected development in the Company’s order backlog. Forward looking information involves known and unknown risks and uncertainties that could cause actual results to differ materially from those predicted by the forward‑looking information.  We caution readers not to place undue reliance on forward looking information as a number of factors could cause actual events, results and prospects to differ materially from those expressed in or implied by the forward looking information.  Significant risks facing the Company include, but are not limited to: the impact on the Company of reduced demand for its products and services, including the suspension or cancellation of existing contracts, as a result of lower investment in global oil and gas extraction and transportation activity following the previous declines in the global price of oil and gas, long term changes in global or regional economic activity and changes in energy supply and demand, which impact on the level of global pipeline infrastructure construction; exposure to product and other liability claims; shortages of or significant increases in the prices of raw materials used by the Company; compliance with environmental, trade and other laws; political, economic and other risks arising from the Company’s international operations; and fluctuations in foreign exchange rates. These statements of forward looking information are based on assumptions, estimates and analysis made by management in light of its experience and perception of trends, current conditions and expected developments as well as other factors believed to be reasonable and relevant in the circumstances.  These assumptions include those in respect of global oil and gas prices, increases in expenditures on natural gas infrastructures, modest global economic growth,  the Company’s ability to execute projects under contract, the continued supply of and stable pricing for commodities used by the Company, the availability of personnel resources sufficient for the Company to operate its businesses, the maintenance of operations in major oil and gas producing regions and the ability of the Company to satisfy all covenants under its Credit Facilities and the Senior Notes. The Company believes that the expectations reflected in the forward looking information are based on reasonable assumptions in light of currently available information.  However, should one or more risks materialize or should any assumptions prove incorrect, then actual results could vary materially from those expressed or implied in the forward looking information included in this document and the Company can give no assurance that such expectations will be achieved. When considering the forward looking information in making decisions with respect to the Company, readers should carefully consider the foregoing factors and other uncertainties and potential events.  The Company does not assume the obligation to revise or update forward looking information after the date of this document or to revise it to reflect the occurrence of future unanticipated events, except as may be required under applicable securities laws. To the extent any forward looking information in this document constitutes future oriented financial information or financial outlooks, within the meaning of securities laws, such information is being provided to demonstrate the potential of the Company and readers are cautioned that this information may not be appropriate for any other purpose. Future oriented financial information and financial outlooks, as with forward looking information generally, are based on the assumptions and subject to the risks noted above. Shawcor will be hosting a Shareholder and Analyst Conference Call and Webcast on Wednesday May 10th, 2017 at 10:00AM ET, which will discuss the Company’s Fourth Quarter Financial Results. To participate via telephone, please dial 1-877-776-4039 or 1-315-625-6955 and enter passcode 7617759; alternatively, please go to the following website address to participate via webcast: http://edge.media-server.com/m/p/rc2fpb5y/ Additional information relating to the Company, including its Annual Information Form, is available on SEDAR at www.sedar.com. Please visit our website at www.shawcor.com for further details. The Company reports on certain non-GAAP measures that are used to evaluate its performance and segments, as well as to determine compliance with debt covenants and to manage the capital structure. These non-GAAP measures do not have standardized meanings under IFRS and are not necessarily comparable to similar measures provided by other companies.  The Company discloses these measures because it believes that they provide further information and assist readers in understanding the results of the Company’s operations and financial position. These measures should not be considered in isolation or used in substitution for other measures of performance prepared in accordance with GAAP.  The following is a reconciliation of the non-GAAP measures reported by the Company.                EBITDA and Adjusted EBITDA EBITDA is a non-GAAP measure defined as earnings before interest, income taxes, depreciation and amortization.  Adjusted EBITDA is also a non-GAAP measure defined as EBITDA adjusted for non-operational items. The Company believes that EBITDA and Adjusted EBITDA are useful supplemental measures that provide a meaningful indication of the Company's results from principal business activities prior to the consideration of how these activities are financed or the tax impacts in various jurisdictions. The Company presents Adjusted EBITDA as a measure of EBITDA that excludes the impact of transactions that are outside the Company’s normal course of business. (a) Adjusted EBITDA and EBITDA are used by many analysts in the oil and gas industry as one of several important analytical tools.


News Article | May 9, 2017
Site: globenewswire.com

TORONTO, May 09, 2017 (GLOBE NEWSWIRE) -- Mr. Steve Orr, Chief Executive Officer of Shawcor Ltd. (TSX:SCL) remarked “Shawcor’s financial performance in the first quarter of 2017 continued the trend of quarter over quarter improvement since the low point that was reached in the second quarter of 2016. Results were positively impacted by excellent project execution at our Asia Pacific pipe coating facilities as well as a steady strengthening in market demand for composite pipe and downhole tubular services in North America. Also, the launch of concrete weight coating for the Sur de Texas – Tuxpan ("Tuxpan") project in Altamira, Mexico contributed approximately $20 million of revenue in the quarter.” Mr. Orr added “With production of the concrete coating work for the Tuxpan pipeline project now well underway in Altamira, Mexico, the Company expects to see a renewed acceleration in earnings growth in the second half of 2017 as the Tuxpan project reaches full production. The Company’s current order backlog at $648 million coupled with our expectation that North American well completion activity will continue to improve, provides us with confidence that Shawcor will deliver solid results in 2017. With this positive outlook and the Company’s strong balance sheet, management is in an excellent position to focus on executing our long term growth strategy.” 1 See Section 6.0 – Reconciliation of Non-GAAP Measures for further details and a reconciliation for Adjusted EBITDA. (a) EBITDA is a non-GAAP measure calculated by adding back to net income (loss) the sum of net finance costs, income taxes and amortization of property, plant, equipment and intangible assets. EBITDA does not have a standardized meaning prescribed by GAAP and is not necessarily comparable to similar measures provided by other companies. EBITDA is used by many analysts in the oil and gas industry as one of several important analytical tools. It is also considered important by lenders to the Company. It should not be considered in isolation or used as an alternative to net income or any of the other measures of performance prepared in accordance with GAAP. (b) Attributable to shareholders of the Company. Contract to Provide Pipe Coating Services for Thailand’s Fifth Transmission Pipeline Project On April 7, 2017, the Company announced that its pipe coating division had received a contract in excess of C$40 million from Marubeni-Itochu Tubulars Asia Pte Ltd, a 100% subsidiary of Marubeni-Itochu Steel Inc., to provide internal lining and three layer polyethylene anti-corrosion pipeline coatings for Thailand’s Fifth Transmission Pipeline project. This project is owned by PTT Public Company Limited, a Thai state enterprise company. The pipeline will run through 8 provinces in Thailand and is aimed at reducing risks to electrical power security and easing the delivery of gas from the LNG Terminal in Rayong, Thailand to the Western region. This contract will be executed in Shawcor's coating facilities in Malaysia, and is expected to commence in Q4 2017 and to be completed by Q4 2018. The Company believes that the decline in global oil and gas investment that followed the decrease in oil and gas prices in the second half of 2014 has reached a cycle low and is now beginning to trend towards improvement. Shawcor’s financial performance is closely correlated with oil and gas infrastructure spending and the trend towards stabilization in market demand for the Company’s products and services has enabled the Company to report quarter over quarter gains in revenue and operating income since the trough of the cycle in the second quarter of 2016. The level of improvement in market demand combined with Shawcor’s booked order backlog is expected to enable the Company to deliver solid growth in financial performance in 2017. However, the rate of improvement will vary by region. The region with the most momentum for stronger activity is North America and in particular the number of rigs operating and the number of new oil and gas wells being drilled and completed. As the rig counts in Canada and the USA have improved since early 2016, the demand for the Company’s gathering line pipeline products and services has strengthened. It is expected that increased gathering pipeline construction will lead to new transmission infrastructure investment to accommodate increased production volumes, particularly in west Texas and in the eastern USA. Internationally, economic growth in emerging markets and supportive political mandates to reduce hydrocarbon emissions in electricity generation is leading to investment in new natural gas pipeline infrastructure. Examples include the Company’s Tuxpan undersea natural gas pipeline project in Mexico and the recently awarded PTT 5th Transmission pipeline project in Thailand. These projects are not directly related to new hydrocarbon production and thus oil and gas prices are not determinative in the project investment decision. As a result, the projects are proceeding now at an early stage of the new capital investment cycle. In contrast to natural gas demand driven projects, oil and gas greenfield development projects that enable new hydrocarbon production as well as smaller production sustaining capital projects are lagging as national and international oil companies continue to limit commitments for new projects to ensure that capital spending is in line with reduced operating cash flow. However, capital investments will eventually be required to offset depleting production with resulting growth in demand for Shawcor’s international products and services beyond 2017. Further detail on the outlook for the Pipeline and Pipe Services segment by region and in the Petrochemical and Industrial segment is set out below. Market demand in Shawcor’s North American Pipeline segment businesses is closely tied to well completion activity in North America which drives the demand for small diameter pipe coating and joint protection, composite pipe for gathering line applications, OCTG pipe inspection and refurbishment and gathering line girth weld inspection. Demand for these products and services is expected to fluctuate with changes in global oil and gas prices and the resulting volume of wells drilled and completed. A persistent improvement in drilling rig counts in North America since the second quarter of 2016 has enabled a modest improvement in revenue for Shawcor’s North American Pipeline segment businesses and this trend is expected to continue in 2017. Beyond 2017, the Company expects that the North American Pipeline and Pipe Services segment will benefit from the build of new pipeline infrastructure in the form of tie-back infrastructure in the Gulf of Mexico and new onshore large diameter transmission lines to support increasing production of shale oil and the export of natural gas to Mexico and internationally through LNG. With the launch of concrete weight coating operations in Altamira, Mexico on the Tuxpan project, the Company expects revenue in the Latin America Pipeline segment region to provide strong growth with full production from the two mobile plants expected to be reached by the end of the second quarter. At March 31, 2017, the Company has booked revenue relating to the Tuxpan project included in the backlog of approximately $340 million to be executed from the second quarter of 2017 to the first quarter of 2018. Shawcor’s EMAR Pipeline segment region has been the Company’s region most impacted by the continued deferral of capital spending on new pipeline infrastructure by national and international oil companies. Although project engineering and bidding activity remains very strong in the region, and the Company is pursuing significant revenue opportunities for girth weld inspection, pipeline joint protection and pipe end preservation on both the Turk Stream and Nord Stream 2 pipelines, these opportunities are not likely to benefit revenue until 2018 or later. The Company’s Asia Pacific region has benefited over the past two quarters from the execution of the flow assurance work for the Shah Deniz project and the anti-corrosion coating for pipe destined for Mexico for the Tuxpan project. With the region’s involvement in the coating of these projects now complete, revenue will decrease as project activity will be limited until the PTT 5th Transmission pipeline project commences later in the year. Shawcor’s Petrochemical and Industrial segment businesses continue to deliver steady growth in revenue and earnings based on consistent demand growth in the North American and European automotive, industrial and nuclear refurbishment markets served by the segment. This trend is expected to continue in 2017 as new capacity for control cable and sealing and insulation products enters production and relieves capacity constraints that are currently limiting revenue growth. The Company’s order backlog consists of firm customer orders only and represents the revenue the Company expects to realize on booked orders over the succeeding twelve months. The Company reports the twelve month billable backlog because it provides a leading indicator of significant changes in consolidated revenue. The order backlog at March 31, 2017 of $648 million was in line with the order backlog of $650 million at December 31, 2016. Revenue generated in the quarter from backlog orders was offset by new orders and the movement of a portion of the booked order for the Tuxpan project in Mexico that is planned for execution in the first quarter of 2018. In addition to the backlog, the Company closely monitors its bidding activity and the value of outstanding firm bids is currently in excess of $600 million. In addition, the Company has provided budgetary estimates and is currently working with customers on projects with aggregate values of approximately $1.6 billion. Although the Company cannot be certain on the timing of these projects, they do represent a diverse portfolio of opportunities to sustain and grow the backlog in 2017 and beyond. The following table sets forth revenue by reportable operating segment for the following periods: (a) Represents the elimination of the inter-segment sales between the Pipeline and Pipe Services segment and the Petrochemical and Industrial segment. Consolidated revenue increased 9%, or $30.6 million, from $329.2 million during the fourth quarter of 2016 to $359.7 million during the first quarter of 2017, due to increases of $22.8 million in the Pipeline and Pipe Services segment and $8.0 million in the Petrochemical and Industrial segment. Revenue increased by 8% in the Pipeline and Pipe Services segment, or $22.8 million, from $286.2 million in the fourth quarter of 2016 to $309.0 million in the first quarter of 2017, due to higher activity levels in Asia Pacific, Latin America and North America, partially offset by lower volumes in the Europe, Middle East, Africa and Russia ("EMAR") region. See Section 3.1 – Pipeline and Pipe Services Segment for additional disclosure with respect to the change in revenue in the Pipeline and Pipe Services segment. In the Petrochemical and Industrial segment, revenue was higher by $8.0 million, or 19%, in the first quarter of 2017, compared to the fourth quarter of 2016, due to higher activity levels in all regions. See Section 3.2 – Petrochemical and Industrial Segment for additional disclosure with respect to the change in revenue in the Petrochemical and Industrial segment. Consolidated revenue decreased by $5.8 million, or 2%, from $365.6 million during the first quarter of 2016, to $359.7 million during the first quarter of 2017, due to a decrease of $7.9 million in the Pipeline and Pipe Services segment, partially offset by a $2.5 million increase in the Petrochemical and Industrial segment. In the Pipeline and Pipe Services segment, revenue in the first quarter of 2017 was $309.0 million, or 3% lower than in the first quarter of 2016, due to decreased activity levels in EMAR, partially offset by higher activity levels in North America, Latin America and Asia Pacific. See Section 3.1 – Pipeline and Pipe Services Segment for additional disclosure with respect to the change in revenue in the Pipeline and Pipe Services segment. In the Petrochemical and Industrial segment, revenue increased by $2.5 million, or 5%, during the first quarter of 2017, compared to the first quarter of 2016, due to increased activity levels in all regions. See Section 3.2 – Petrochemical and Industrial Segment for additional disclosure with respect to the change in revenue in the Petrochemical and Industrial segment. The following table sets forth operating income and operating margin for the following periods: (a) Operating margin is defined as operating income divided by revenue and is a non-GAAP measure. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. Operating income increased by $4.1 million, from an operating income of $21.7 million during the fourth quarter of 2016 to operating income of $25.8 million in the first quarter of 2017. Operating income was positively impacted by increases in gross profit of $22.0 million. This was partially offset by an increase in selling, general and administrative ("SG&A") expenses of $7.3 million, a $1.3 million increase in research and development expenses, a $2.8 million increase in net foreign exchange losses and a $5.6 million in gain on sale of land recorded in the fourth quarter of 2016. The increase in gross profit resulted from the higher revenue, as explained above, and a 3.3 percentage point increase in the gross margin from the fourth quarter of 2016. The increase in the gross margin percentage was primarily due to product and project mix, labour cost efficiencies due to higher facility utilization and increased absorption of manufacturing overheads and a $4.8 million reduction in the carrying value of inventory recorded in the fourth quarter of 2016. SG&A expenses increased by $7.3 million, from $71.8 million in the fourth quarter of 2016 to $79.0 million in the first quarter of 2017, primarily due to an increase in personnel related and management incentive compensation expenses of $4.6 million and an increase of $5.7 million due to reductions in provisions for import duties and decommissioning obligations recorded in the fourth quarter of 2016. This was partially offset by a $3.0 million reduction in warranty provisions and professional fees. Operating income increased by $9.9 million, from an operating income of $16.0 million in the first quarter of 2016 to an operating income of $25.8 million during the first quarter of 2017. Operating income was impacted by an increase in gross profit of $2.7 million, decreases of $4.8 million in SG&A expenses, $0.7 million in research and development expenses, $1.4 million in amortization of property, plant, equipment and intangible assets and $0.3 million in net foreign exchange losses. The increase in gross profit resulted from a 1.3 percentage point increase in gross margin, partially offset by the lower revenue, as explained above. The increase in the gross margin percentage was primarily attributable to product and project mix. SG&A expenses in the first quarter of 2017 decreased by $4.8 million compared to the first quarter of 2016, primarily due to a $3.6 million reduction in personnel related expenses, a $1.8 million decrease in professional fees, a decrease in rental related expenses for facilities of $2.4 million and a net reduction in other costs of $1.4 million. Partially offsetting these expense reductions was an increase in management incentive compensation expenses of $4.4 million. The following table sets forth the components of finance costs, net for the following periods: In the first quarter of 2017, net finance costs were $5.6 million, compared to a net finance cost of $2.9 million during the fourth quarter of 2016. The increase in net finance costs was due to a decrease in interest income of $1.8 million on short term deposits and other receivables, a $0.4 million increase in interest expense on long term debt and higher interest on bank borrowings and facilities of $0.6 million. In the first quarter of 2017, net finance costs were $5.6 million, compared to a net finance cost of $4.7 million during the first quarter of 2016. The increase in net finance costs was primarily a result of higher interest expense on bank borrowings and facilities. The following table sets forth the income tax expenses for the following periods: The Company recorded an income tax expense of $2.5 million (14% of income before income taxes) in the first quarter of 2017, compared to an income tax expense of $7.0 million (20% of income before income taxes) in the fourth quarter of 2016. The effective tax rate in the first quarter of 2017 was lower than the expected income tax rate of 27% primarily due to a portion of the Company’s taxable income being earned in lower tax jurisdictions and losses being generated in higher tax jurisdictions. The Company recorded an income tax expense of $2.5 million (14% of income before income taxes) in the first quarter of 2017, compared to an income tax expense of $2.6 million (24% of income before income taxes) in the first quarter of 2016. The effective tax rate in the first quarter of 2017 was lower than the expected income tax rate of 27% primarily due to a portion of the Company’s taxable income being earned in lower tax jurisdictions and losses being generated in higher tax jurisdictions. The following table sets forth the significant currencies in which the Company operates and the average foreign exchange rates for these currencies versus Canadian dollars, for the following periods: The following table sets forth the impact on revenue, operating income and net income (attributable to shareholders of the Company), compared with the prior quarter and the prior year period, as a result of foreign exchange fluctuations on the translation of foreign currency operations: In addition to the translation impact noted above, the Company recorded a foreign exchange loss of $1.4 million in the first quarter of 2017, compared to a foreign exchange loss of $1.7 million for the comparable period in the prior year, as a result of the impact of changes in foreign exchange rates on monetary assets and liabilities and short term foreign currency intercompany loans within the group, net of hedging activities. 2.6  Net Income (attributable to shareholders of the Company) Net income decreased by $12.1 million, from a net income of $27.3 million during the fourth quarter of 2016 to a net income of $15.1 million during the first quarter of 2017. This was mainly due to a $19.2 million arbitration award against Wasco Energy recorded in the fourth quarter of 2016 and a $2.8 million increase in finance costs.  This was partially offset by the $4.1 million increase in operating income, as explained in section 2.2 above, and a $4.4 million decrease in income tax expense. Net income increased by $7.7 million, from $7.5 million during the first quarter of 2016 to $15.1 million during the first quarter of 2017. This was mainly due to the $9.9 million increase in operating income, as explained in section 2.2 above. This was partially offset by a $0.9 increase in finance costs and a $2.0 million higher loss from investments in associates. The following table sets forth, by geographic location, the revenue, operating income and operating margin for the Pipeline and Pipe Services segment for the following periods: (a) Operating margin is defined as operating income divided by revenue and is a non-GAAP measure. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. Revenue in the first quarter of 2017 increased by $22.8 million to $309.0 million, from $286.2 million in the fourth quarter of 2016. Revenue benefitted from higher activity levels in Asia Pacific, Latin America and North America, partially offset by lower volumes in EMAR: In the first quarter of 2017, operating income was $24.6 million compared to an operating income of $11.7 million in the fourth quarter of 2016, an increase of $12.9 million. The increase in operating income was primarily due to the $18.3 million increase in gross profit due to the increase in revenue, as explained above, and a 3.5 percentage point increase in gross margin. The increase in gross margin was due to favourable project mix, labour efficiencies due to higher facility utilization and increased manufacturing overhead absorption and a $4.8 million reduction in the carrying value of inventory recorded in the fourth quarter of 2016. This was partially offset by higher SG&A expenses, explained in section 2.2 above, and the $5.6 million gain on sale of land recorded in the fourth quarter of 2016. Revenue in the first quarter of 2017 was $309.0 million, a decrease of $7.9 million, or 3%, from $317.0 million in the comparable period of 2016. Segment revenue was adversely affected by the impact on translation of foreign operations, as noted in section 2.5 above, and lower activity levels in EMAR, partially offset by higher revenue in North America, Latin America and Asia Pacific: In the first quarter of 2017, operating income was $24.6 million compared to $16.2 million in the first quarter of 2016, an increase of $8.4 million. This increase was attributable primarily to a reduction in SG&A expenses, decreases in research and development expenses and amortization of property, plant, equipment and intangible assets, as explained in section 2.2 above. This was partially offset by a reduction in gross profit of $1.1 million as a result of a decrease in revenue of $7.9 million, as explained above, partially offset by a 0.5 percentage point increase in gross margin. The increase in gross margin was due to favourable project mix. The following table sets forth, by geographic location, the revenue, operating income and operating margin for the Petrochemical and Industrial segment for the following periods: (a) Operating margin is defined as operating income divided by revenue and is a non-GAAP measure. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. In the first quarter of 2017, revenue increased by $8.0 million, or 19%, to $51.4 million, compared to the fourth quarter of 2016, primarily due to increased shipments of heat shrink tubing product, particularly in the automotive sector, and higher activity levels for wire and cable products. Operating income of $9.6 million in the first quarter of 2017 was $3.4 million, or 54%, higher than in the fourth quarter of 2016. The increase in operating income was primarily due to an increase in gross profit of $3.6 million due to the increased revenue, as explained above, and a 2.4 percentage point increase in gross margin. The increase in gross margin was due to favourable product mix and labour efficiencies due to higher facility utilization and increased manufacturing overhead absorption. Revenue in the first quarter of 2017 increased by $2.5 million, or 5%, compared to the first quarter of 2016. Revenue was impacted by increased shipments of heat shrink tubing product, particularly in the automotive sector, and by higher activity levels for wire and cable products. Operating income in the first quarter of 2017 was $9.6 million compared to $7.6 million in the first quarter of 2016, an increase of $2.1 million, or 27%. The increase in operating income was primarily due to an increase in gross profit of $2.7 million as a result of an increase in revenue of $2.5 million, as explained above, and a 4.0 percentage point increase in gross margin. The increase in gross margin was due to favourable product mix and labour efficiencies due to higher facility utilization and increased manufacturing overhead absorption. Financial and corporate costs include corporate expenses not allocated to the operating segments and other non-operating items, including foreign exchange gains and losses on foreign currency denominated cash and working capital balances. The corporate division of the Company only earns revenue that is considered incidental to the activities of the Company. As a result, it does not meet the definition of a reportable operating segment as defined under IFRS. The following table sets forth the Company’s unallocated financial and corporate expenses, before foreign exchange gains and losses, for the following periods: Financial and corporate costs increased by $3.8 million from $3.2 million during the fourth quarter of 2016 to $7.0 million in the first quarter of 2017. The increase was primarily due to an increase in personnel related and management incentive compensation expenses of $2.0 million. In addition, in the fourth quarter of 2016, $1.5 million in provisions for pension expense and professional fees were reversed. Financial and corporate costs increased by $0.9 million from the first quarter of 2016 to $7.0 million in the first quarter of 2017. The increase was primarily due to higher personnel related and stock based and long term management incentive expenses of $2.6 million. This was partially offset by a $1.5 million decrease in professional consulting and legal fees. This document includes certain statements that reflect management’s expectations and objectives for the Company’s future performance, opportunities and growth, which statements constitute “forward‑looking information” and “forward looking statements” (collectively “forward looking information”) under applicable securities laws.  Such statements, other than statements of historical fact, are predictive in nature or depend on future events or conditions. Forward looking information involves estimates, assumptions, judgments and uncertainties.  These statements may be identified by the use of forward‑looking terminology such as "may", "will", "should", "anticipate", "expect", "believe", "predict", "estimate", "continue", "intend", "plan" and variations of these words or other similar expressions.  Specifically, this document includes forward looking information in the Outlook section and elsewhere in respect of, among other things, the achievement of key performance objectives, the incurrence of additional capital expenditures as necessary to respond to market demand growth and to facilitate growth in new markets, the increase in investment in net working capital, the timing of major project activity, the expected improvement in consolidated revenues and earnings in 2017 from 2016, the growth in revenue and earnings in the Pipeline and Pipe Services segment and in the Petrochemical and Industrial segment of the Company’s business, the sufficiency of resources, capacity and capital to meet market demand, to meet contractual obligations and to execute the Company’s development and growth strategy, the impact of the existing order backlog and other factors on the Company’s revenue and operating income, the impact of global economic activity on the demand for the Company's products, the impact of the improvement in global oil and gas commodity prices on the level of industry investment in oil and gas infrastructure, the impact of changing energy demand, supply and prices, the impact and likelihood of changes in competitive conditions in the markets in which the Company participates, the adequacy of the Company’s existing accruals in respect of environmental compliance and in respect of litigation matters and other claims generally, the level of payments under the Company's performance bonds  and the expected development in the Company’s order backlog. Forward looking information involves known and unknown risks and uncertainties that could cause actual results to differ materially from those predicted by the forward‑looking information.  We caution readers not to place undue reliance on forward looking information as a number of factors could cause actual events, results and prospects to differ materially from those expressed in or implied by the forward looking information.  Significant risks facing the Company include, but are not limited to: the impact on the Company of reduced demand for its products and services, including the suspension or cancellation of existing contracts, as a result of lower investment in global oil and gas extraction and transportation activity following the previous declines in the global price of oil and gas, long term changes in global or regional economic activity and changes in energy supply and demand, which impact on the level of global pipeline infrastructure construction; exposure to product and other liability claims; shortages of or significant increases in the prices of raw materials used by the Company; compliance with environmental, trade and other laws; political, economic and other risks arising from the Company’s international operations; and fluctuations in foreign exchange rates. These statements of forward looking information are based on assumptions, estimates and analysis made by management in light of its experience and perception of trends, current conditions and expected developments as well as other factors believed to be reasonable and relevant in the circumstances.  These assumptions include those in respect of global oil and gas prices, increases in expenditures on natural gas infrastructures, modest global economic growth,  the Company’s ability to execute projects under contract, the continued supply of and stable pricing for commodities used by the Company, the availability of personnel resources sufficient for the Company to operate its businesses, the maintenance of operations in major oil and gas producing regions and the ability of the Company to satisfy all covenants under its Credit Facilities and the Senior Notes. The Company believes that the expectations reflected in the forward looking information are based on reasonable assumptions in light of currently available information.  However, should one or more risks materialize or should any assumptions prove incorrect, then actual results could vary materially from those expressed or implied in the forward looking information included in this document and the Company can give no assurance that such expectations will be achieved. When considering the forward looking information in making decisions with respect to the Company, readers should carefully consider the foregoing factors and other uncertainties and potential events.  The Company does not assume the obligation to revise or update forward looking information after the date of this document or to revise it to reflect the occurrence of future unanticipated events, except as may be required under applicable securities laws. To the extent any forward looking information in this document constitutes future oriented financial information or financial outlooks, within the meaning of securities laws, such information is being provided to demonstrate the potential of the Company and readers are cautioned that this information may not be appropriate for any other purpose. Future oriented financial information and financial outlooks, as with forward looking information generally, are based on the assumptions and subject to the risks noted above. Shawcor will be hosting a Shareholder and Analyst Conference Call and Webcast on Wednesday May 10th, 2017 at 10:00AM ET, which will discuss the Company’s Fourth Quarter Financial Results. To participate via telephone, please dial 1-877-776-4039 or 1-315-625-6955 and enter passcode 7617759; alternatively, please go to the following website address to participate via webcast: http://edge.media-server.com/m/p/rc2fpb5y/ Additional information relating to the Company, including its Annual Information Form, is available on SEDAR at www.sedar.com. Please visit our website at www.shawcor.com for further details. The Company reports on certain non-GAAP measures that are used to evaluate its performance and segments, as well as to determine compliance with debt covenants and to manage the capital structure. These non-GAAP measures do not have standardized meanings under IFRS and are not necessarily comparable to similar measures provided by other companies.  The Company discloses these measures because it believes that they provide further information and assist readers in understanding the results of the Company’s operations and financial position. These measures should not be considered in isolation or used in substitution for other measures of performance prepared in accordance with GAAP.  The following is a reconciliation of the non-GAAP measures reported by the Company.                EBITDA and Adjusted EBITDA EBITDA is a non-GAAP measure defined as earnings before interest, income taxes, depreciation and amortization.  Adjusted EBITDA is also a non-GAAP measure defined as EBITDA adjusted for non-operational items. The Company believes that EBITDA and Adjusted EBITDA are useful supplemental measures that provide a meaningful indication of the Company's results from principal business activities prior to the consideration of how these activities are financed or the tax impacts in various jurisdictions. The Company presents Adjusted EBITDA as a measure of EBITDA that excludes the impact of transactions that are outside the Company’s normal course of business. (a) Adjusted EBITDA and EBITDA are used by many analysts in the oil and gas industry as one of several important analytical tools.


News Article | May 9, 2017
Site: globenewswire.com

TORONTO, May 09, 2017 (GLOBE NEWSWIRE) -- Mr. Steve Orr, Chief Executive Officer of Shawcor Ltd. (TSX:SCL) remarked “Shawcor’s financial performance in the first quarter of 2017 continued the trend of quarter over quarter improvement since the low point that was reached in the second quarter of 2016. Results were positively impacted by excellent project execution at our Asia Pacific pipe coating facilities as well as a steady strengthening in market demand for composite pipe and downhole tubular services in North America. Also, the launch of concrete weight coating for the Sur de Texas – Tuxpan ("Tuxpan") project in Altamira, Mexico contributed approximately $20 million of revenue in the quarter.” Mr. Orr added “With production of the concrete coating work for the Tuxpan pipeline project now well underway in Altamira, Mexico, the Company expects to see a renewed acceleration in earnings growth in the second half of 2017 as the Tuxpan project reaches full production. The Company’s current order backlog at $648 million coupled with our expectation that North American well completion activity will continue to improve, provides us with confidence that Shawcor will deliver solid results in 2017. With this positive outlook and the Company’s strong balance sheet, management is in an excellent position to focus on executing our long term growth strategy.” 1 See Section 6.0 – Reconciliation of Non-GAAP Measures for further details and a reconciliation for Adjusted EBITDA. (a) EBITDA is a non-GAAP measure calculated by adding back to net income (loss) the sum of net finance costs, income taxes and amortization of property, plant, equipment and intangible assets. EBITDA does not have a standardized meaning prescribed by GAAP and is not necessarily comparable to similar measures provided by other companies. EBITDA is used by many analysts in the oil and gas industry as one of several important analytical tools. It is also considered important by lenders to the Company. It should not be considered in isolation or used as an alternative to net income or any of the other measures of performance prepared in accordance with GAAP. (b) Attributable to shareholders of the Company. Contract to Provide Pipe Coating Services for Thailand’s Fifth Transmission Pipeline Project On April 7, 2017, the Company announced that its pipe coating division had received a contract in excess of C$40 million from Marubeni-Itochu Tubulars Asia Pte Ltd, a 100% subsidiary of Marubeni-Itochu Steel Inc., to provide internal lining and three layer polyethylene anti-corrosion pipeline coatings for Thailand’s Fifth Transmission Pipeline project. This project is owned by PTT Public Company Limited, a Thai state enterprise company. The pipeline will run through 8 provinces in Thailand and is aimed at reducing risks to electrical power security and easing the delivery of gas from the LNG Terminal in Rayong, Thailand to the Western region. This contract will be executed in Shawcor's coating facilities in Malaysia, and is expected to commence in Q4 2017 and to be completed by Q4 2018. The Company believes that the decline in global oil and gas investment that followed the decrease in oil and gas prices in the second half of 2014 has reached a cycle low and is now beginning to trend towards improvement. Shawcor’s financial performance is closely correlated with oil and gas infrastructure spending and the trend towards stabilization in market demand for the Company’s products and services has enabled the Company to report quarter over quarter gains in revenue and operating income since the trough of the cycle in the second quarter of 2016. The level of improvement in market demand combined with Shawcor’s booked order backlog is expected to enable the Company to deliver solid growth in financial performance in 2017. However, the rate of improvement will vary by region. The region with the most momentum for stronger activity is North America and in particular the number of rigs operating and the number of new oil and gas wells being drilled and completed. As the rig counts in Canada and the USA have improved since early 2016, the demand for the Company’s gathering line pipeline products and services has strengthened. It is expected that increased gathering pipeline construction will lead to new transmission infrastructure investment to accommodate increased production volumes, particularly in west Texas and in the eastern USA. Internationally, economic growth in emerging markets and supportive political mandates to reduce hydrocarbon emissions in electricity generation is leading to investment in new natural gas pipeline infrastructure. Examples include the Company’s Tuxpan undersea natural gas pipeline project in Mexico and the recently awarded PTT 5th Transmission pipeline project in Thailand. These projects are not directly related to new hydrocarbon production and thus oil and gas prices are not determinative in the project investment decision. As a result, the projects are proceeding now at an early stage of the new capital investment cycle. In contrast to natural gas demand driven projects, oil and gas greenfield development projects that enable new hydrocarbon production as well as smaller production sustaining capital projects are lagging as national and international oil companies continue to limit commitments for new projects to ensure that capital spending is in line with reduced operating cash flow. However, capital investments will eventually be required to offset depleting production with resulting growth in demand for Shawcor’s international products and services beyond 2017. Further detail on the outlook for the Pipeline and Pipe Services segment by region and in the Petrochemical and Industrial segment is set out below. Market demand in Shawcor’s North American Pipeline segment businesses is closely tied to well completion activity in North America which drives the demand for small diameter pipe coating and joint protection, composite pipe for gathering line applications, OCTG pipe inspection and refurbishment and gathering line girth weld inspection. Demand for these products and services is expected to fluctuate with changes in global oil and gas prices and the resulting volume of wells drilled and completed. A persistent improvement in drilling rig counts in North America since the second quarter of 2016 has enabled a modest improvement in revenue for Shawcor’s North American Pipeline segment businesses and this trend is expected to continue in 2017. Beyond 2017, the Company expects that the North American Pipeline and Pipe Services segment will benefit from the build of new pipeline infrastructure in the form of tie-back infrastructure in the Gulf of Mexico and new onshore large diameter transmission lines to support increasing production of shale oil and the export of natural gas to Mexico and internationally through LNG. With the launch of concrete weight coating operations in Altamira, Mexico on the Tuxpan project, the Company expects revenue in the Latin America Pipeline segment region to provide strong growth with full production from the two mobile plants expected to be reached by the end of the second quarter. At March 31, 2017, the Company has booked revenue relating to the Tuxpan project included in the backlog of approximately $340 million to be executed from the second quarter of 2017 to the first quarter of 2018. Shawcor’s EMAR Pipeline segment region has been the Company’s region most impacted by the continued deferral of capital spending on new pipeline infrastructure by national and international oil companies. Although project engineering and bidding activity remains very strong in the region, and the Company is pursuing significant revenue opportunities for girth weld inspection, pipeline joint protection and pipe end preservation on both the Turk Stream and Nord Stream 2 pipelines, these opportunities are not likely to benefit revenue until 2018 or later. The Company’s Asia Pacific region has benefited over the past two quarters from the execution of the flow assurance work for the Shah Deniz project and the anti-corrosion coating for pipe destined for Mexico for the Tuxpan project. With the region’s involvement in the coating of these projects now complete, revenue will decrease as project activity will be limited until the PTT 5th Transmission pipeline project commences later in the year. Shawcor’s Petrochemical and Industrial segment businesses continue to deliver steady growth in revenue and earnings based on consistent demand growth in the North American and European automotive, industrial and nuclear refurbishment markets served by the segment. This trend is expected to continue in 2017 as new capacity for control cable and sealing and insulation products enters production and relieves capacity constraints that are currently limiting revenue growth. The Company’s order backlog consists of firm customer orders only and represents the revenue the Company expects to realize on booked orders over the succeeding twelve months. The Company reports the twelve month billable backlog because it provides a leading indicator of significant changes in consolidated revenue. The order backlog at March 31, 2017 of $648 million was in line with the order backlog of $650 million at December 31, 2016. Revenue generated in the quarter from backlog orders was offset by new orders and the movement of a portion of the booked order for the Tuxpan project in Mexico that is planned for execution in the first quarter of 2018. In addition to the backlog, the Company closely monitors its bidding activity and the value of outstanding firm bids is currently in excess of $600 million. In addition, the Company has provided budgetary estimates and is currently working with customers on projects with aggregate values of approximately $1.6 billion. Although the Company cannot be certain on the timing of these projects, they do represent a diverse portfolio of opportunities to sustain and grow the backlog in 2017 and beyond. The following table sets forth revenue by reportable operating segment for the following periods: (a) Represents the elimination of the inter-segment sales between the Pipeline and Pipe Services segment and the Petrochemical and Industrial segment. Consolidated revenue increased 9%, or $30.6 million, from $329.2 million during the fourth quarter of 2016 to $359.7 million during the first quarter of 2017, due to increases of $22.8 million in the Pipeline and Pipe Services segment and $8.0 million in the Petrochemical and Industrial segment. Revenue increased by 8% in the Pipeline and Pipe Services segment, or $22.8 million, from $286.2 million in the fourth quarter of 2016 to $309.0 million in the first quarter of 2017, due to higher activity levels in Asia Pacific, Latin America and North America, partially offset by lower volumes in the Europe, Middle East, Africa and Russia ("EMAR") region. See Section 3.1 – Pipeline and Pipe Services Segment for additional disclosure with respect to the change in revenue in the Pipeline and Pipe Services segment. In the Petrochemical and Industrial segment, revenue was higher by $8.0 million, or 19%, in the first quarter of 2017, compared to the fourth quarter of 2016, due to higher activity levels in all regions. See Section 3.2 – Petrochemical and Industrial Segment for additional disclosure with respect to the change in revenue in the Petrochemical and Industrial segment. Consolidated revenue decreased by $5.8 million, or 2%, from $365.6 million during the first quarter of 2016, to $359.7 million during the first quarter of 2017, due to a decrease of $7.9 million in the Pipeline and Pipe Services segment, partially offset by a $2.5 million increase in the Petrochemical and Industrial segment. In the Pipeline and Pipe Services segment, revenue in the first quarter of 2017 was $309.0 million, or 3% lower than in the first quarter of 2016, due to decreased activity levels in EMAR, partially offset by higher activity levels in North America, Latin America and Asia Pacific. See Section 3.1 – Pipeline and Pipe Services Segment for additional disclosure with respect to the change in revenue in the Pipeline and Pipe Services segment. In the Petrochemical and Industrial segment, revenue increased by $2.5 million, or 5%, during the first quarter of 2017, compared to the first quarter of 2016, due to increased activity levels in all regions. See Section 3.2 – Petrochemical and Industrial Segment for additional disclosure with respect to the change in revenue in the Petrochemical and Industrial segment. The following table sets forth operating income and operating margin for the following periods: (a) Operating margin is defined as operating income divided by revenue and is a non-GAAP measure. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. Operating income increased by $4.1 million, from an operating income of $21.7 million during the fourth quarter of 2016 to operating income of $25.8 million in the first quarter of 2017. Operating income was positively impacted by increases in gross profit of $22.0 million. This was partially offset by an increase in selling, general and administrative ("SG&A") expenses of $7.3 million, a $1.3 million increase in research and development expenses, a $2.8 million increase in net foreign exchange losses and a $5.6 million in gain on sale of land recorded in the fourth quarter of 2016. The increase in gross profit resulted from the higher revenue, as explained above, and a 3.3 percentage point increase in the gross margin from the fourth quarter of 2016. The increase in the gross margin percentage was primarily due to product and project mix, labour cost efficiencies due to higher facility utilization and increased absorption of manufacturing overheads and a $4.8 million reduction in the carrying value of inventory recorded in the fourth quarter of 2016. SG&A expenses increased by $7.3 million, from $71.8 million in the fourth quarter of 2016 to $79.0 million in the first quarter of 2017, primarily due to an increase in personnel related and management incentive compensation expenses of $4.6 million and an increase of $5.7 million due to reductions in provisions for import duties and decommissioning obligations recorded in the fourth quarter of 2016. This was partially offset by a $3.0 million reduction in warranty provisions and professional fees. Operating income increased by $9.9 million, from an operating income of $16.0 million in the first quarter of 2016 to an operating income of $25.8 million during the first quarter of 2017. Operating income was impacted by an increase in gross profit of $2.7 million, decreases of $4.8 million in SG&A expenses, $0.7 million in research and development expenses, $1.4 million in amortization of property, plant, equipment and intangible assets and $0.3 million in net foreign exchange losses. The increase in gross profit resulted from a 1.3 percentage point increase in gross margin, partially offset by the lower revenue, as explained above. The increase in the gross margin percentage was primarily attributable to product and project mix. SG&A expenses in the first quarter of 2017 decreased by $4.8 million compared to the first quarter of 2016, primarily due to a $3.6 million reduction in personnel related expenses, a $1.8 million decrease in professional fees, a decrease in rental related expenses for facilities of $2.4 million and a net reduction in other costs of $1.4 million. Partially offsetting these expense reductions was an increase in management incentive compensation expenses of $4.4 million. The following table sets forth the components of finance costs, net for the following periods: In the first quarter of 2017, net finance costs were $5.6 million, compared to a net finance cost of $2.9 million during the fourth quarter of 2016. The increase in net finance costs was due to a decrease in interest income of $1.8 million on short term deposits and other receivables, a $0.4 million increase in interest expense on long term debt and higher interest on bank borrowings and facilities of $0.6 million. In the first quarter of 2017, net finance costs were $5.6 million, compared to a net finance cost of $4.7 million during the first quarter of 2016. The increase in net finance costs was primarily a result of higher interest expense on bank borrowings and facilities. The following table sets forth the income tax expenses for the following periods: The Company recorded an income tax expense of $2.5 million (14% of income before income taxes) in the first quarter of 2017, compared to an income tax expense of $7.0 million (20% of income before income taxes) in the fourth quarter of 2016. The effective tax rate in the first quarter of 2017 was lower than the expected income tax rate of 27% primarily due to a portion of the Company’s taxable income being earned in lower tax jurisdictions and losses being generated in higher tax jurisdictions. The Company recorded an income tax expense of $2.5 million (14% of income before income taxes) in the first quarter of 2017, compared to an income tax expense of $2.6 million (24% of income before income taxes) in the first quarter of 2016. The effective tax rate in the first quarter of 2017 was lower than the expected income tax rate of 27% primarily due to a portion of the Company’s taxable income being earned in lower tax jurisdictions and losses being generated in higher tax jurisdictions. The following table sets forth the significant currencies in which the Company operates and the average foreign exchange rates for these currencies versus Canadian dollars, for the following periods: The following table sets forth the impact on revenue, operating income and net income (attributable to shareholders of the Company), compared with the prior quarter and the prior year period, as a result of foreign exchange fluctuations on the translation of foreign currency operations: In addition to the translation impact noted above, the Company recorded a foreign exchange loss of $1.4 million in the first quarter of 2017, compared to a foreign exchange loss of $1.7 million for the comparable period in the prior year, as a result of the impact of changes in foreign exchange rates on monetary assets and liabilities and short term foreign currency intercompany loans within the group, net of hedging activities. 2.6  Net Income (attributable to shareholders of the Company) Net income decreased by $12.1 million, from a net income of $27.3 million during the fourth quarter of 2016 to a net income of $15.1 million during the first quarter of 2017. This was mainly due to a $19.2 million arbitration award against Wasco Energy recorded in the fourth quarter of 2016 and a $2.8 million increase in finance costs.  This was partially offset by the $4.1 million increase in operating income, as explained in section 2.2 above, and a $4.4 million decrease in income tax expense. Net income increased by $7.7 million, from $7.5 million during the first quarter of 2016 to $15.1 million during the first quarter of 2017. This was mainly due to the $9.9 million increase in operating income, as explained in section 2.2 above. This was partially offset by a $0.9 increase in finance costs and a $2.0 million higher loss from investments in associates. The following table sets forth, by geographic location, the revenue, operating income and operating margin for the Pipeline and Pipe Services segment for the following periods: (a) Operating margin is defined as operating income divided by revenue and is a non-GAAP measure. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. Revenue in the first quarter of 2017 increased by $22.8 million to $309.0 million, from $286.2 million in the fourth quarter of 2016. Revenue benefitted from higher activity levels in Asia Pacific, Latin America and North America, partially offset by lower volumes in EMAR: In the first quarter of 2017, operating income was $24.6 million compared to an operating income of $11.7 million in the fourth quarter of 2016, an increase of $12.9 million. The increase in operating income was primarily due to the $18.3 million increase in gross profit due to the increase in revenue, as explained above, and a 3.5 percentage point increase in gross margin. The increase in gross margin was due to favourable project mix, labour efficiencies due to higher facility utilization and increased manufacturing overhead absorption and a $4.8 million reduction in the carrying value of inventory recorded in the fourth quarter of 2016. This was partially offset by higher SG&A expenses, explained in section 2.2 above, and the $5.6 million gain on sale of land recorded in the fourth quarter of 2016. Revenue in the first quarter of 2017 was $309.0 million, a decrease of $7.9 million, or 3%, from $317.0 million in the comparable period of 2016. Segment revenue was adversely affected by the impact on translation of foreign operations, as noted in section 2.5 above, and lower activity levels in EMAR, partially offset by higher revenue in North America, Latin America and Asia Pacific: In the first quarter of 2017, operating income was $24.6 million compared to $16.2 million in the first quarter of 2016, an increase of $8.4 million. This increase was attributable primarily to a reduction in SG&A expenses, decreases in research and development expenses and amortization of property, plant, equipment and intangible assets, as explained in section 2.2 above. This was partially offset by a reduction in gross profit of $1.1 million as a result of a decrease in revenue of $7.9 million, as explained above, partially offset by a 0.5 percentage point increase in gross margin. The increase in gross margin was due to favourable project mix. The following table sets forth, by geographic location, the revenue, operating income and operating margin for the Petrochemical and Industrial segment for the following periods: (a) Operating margin is defined as operating income divided by revenue and is a non-GAAP measure. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. In the first quarter of 2017, revenue increased by $8.0 million, or 19%, to $51.4 million, compared to the fourth quarter of 2016, primarily due to increased shipments of heat shrink tubing product, particularly in the automotive sector, and higher activity levels for wire and cable products. Operating income of $9.6 million in the first quarter of 2017 was $3.4 million, or 54%, higher than in the fourth quarter of 2016. The increase in operating income was primarily due to an increase in gross profit of $3.6 million due to the increased revenue, as explained above, and a 2.4 percentage point increase in gross margin. The increase in gross margin was due to favourable product mix and labour efficiencies due to higher facility utilization and increased manufacturing overhead absorption. Revenue in the first quarter of 2017 increased by $2.5 million, or 5%, compared to the first quarter of 2016. Revenue was impacted by increased shipments of heat shrink tubing product, particularly in the automotive sector, and by higher activity levels for wire and cable products. Operating income in the first quarter of 2017 was $9.6 million compared to $7.6 million in the first quarter of 2016, an increase of $2.1 million, or 27%. The increase in operating income was primarily due to an increase in gross profit of $2.7 million as a result of an increase in revenue of $2.5 million, as explained above, and a 4.0 percentage point increase in gross margin. The increase in gross margin was due to favourable product mix and labour efficiencies due to higher facility utilization and increased manufacturing overhead absorption. Financial and corporate costs include corporate expenses not allocated to the operating segments and other non-operating items, including foreign exchange gains and losses on foreign currency denominated cash and working capital balances. The corporate division of the Company only earns revenue that is considered incidental to the activities of the Company. As a result, it does not meet the definition of a reportable operating segment as defined under IFRS. The following table sets forth the Company’s unallocated financial and corporate expenses, before foreign exchange gains and losses, for the following periods: Financial and corporate costs increased by $3.8 million from $3.2 million during the fourth quarter of 2016 to $7.0 million in the first quarter of 2017. The increase was primarily due to an increase in personnel related and management incentive compensation expenses of $2.0 million. In addition, in the fourth quarter of 2016, $1.5 million in provisions for pension expense and professional fees were reversed. Financial and corporate costs increased by $0.9 million from the first quarter of 2016 to $7.0 million in the first quarter of 2017. The increase was primarily due to higher personnel related and stock based and long term management incentive expenses of $2.6 million. This was partially offset by a $1.5 million decrease in professional consulting and legal fees. This document includes certain statements that reflect management’s expectations and objectives for the Company’s future performance, opportunities and growth, which statements constitute “forward‑looking information” and “forward looking statements” (collectively “forward looking information”) under applicable securities laws.  Such statements, other than statements of historical fact, are predictive in nature or depend on future events or conditions. Forward looking information involves estimates, assumptions, judgments and uncertainties.  These statements may be identified by the use of forward‑looking terminology such as "may", "will", "should", "anticipate", "expect", "believe", "predict", "estimate", "continue", "intend", "plan" and variations of these words or other similar expressions.  Specifically, this document includes forward looking information in the Outlook section and elsewhere in respect of, among other things, the achievement of key performance objectives, the incurrence of additional capital expenditures as necessary to respond to market demand growth and to facilitate growth in new markets, the increase in investment in net working capital, the timing of major project activity, the expected improvement in consolidated revenues and earnings in 2017 from 2016, the growth in revenue and earnings in the Pipeline and Pipe Services segment and in the Petrochemical and Industrial segment of the Company’s business, the sufficiency of resources, capacity and capital to meet market demand, to meet contractual obligations and to execute the Company’s development and growth strategy, the impact of the existing order backlog and other factors on the Company’s revenue and operating income, the impact of global economic activity on the demand for the Company's products, the impact of the improvement in global oil and gas commodity prices on the level of industry investment in oil and gas infrastructure, the impact of changing energy demand, supply and prices, the impact and likelihood of changes in competitive conditions in the markets in which the Company participates, the adequacy of the Company’s existing accruals in respect of environmental compliance and in respect of litigation matters and other claims generally, the level of payments under the Company's performance bonds  and the expected development in the Company’s order backlog. Forward looking information involves known and unknown risks and uncertainties that could cause actual results to differ materially from those predicted by the forward‑looking information.  We caution readers not to place undue reliance on forward looking information as a number of factors could cause actual events, results and prospects to differ materially from those expressed in or implied by the forward looking information.  Significant risks facing the Company include, but are not limited to: the impact on the Company of reduced demand for its products and services, including the suspension or cancellation of existing contracts, as a result of lower investment in global oil and gas extraction and transportation activity following the previous declines in the global price of oil and gas, long term changes in global or regional economic activity and changes in energy supply and demand, which impact on the level of global pipeline infrastructure construction; exposure to product and other liability claims; shortages of or significant increases in the prices of raw materials used by the Company; compliance with environmental, trade and other laws; political, economic and other risks arising from the Company’s international operations; and fluctuations in foreign exchange rates. These statements of forward looking information are based on assumptions, estimates and analysis made by management in light of its experience and perception of trends, current conditions and expected developments as well as other factors believed to be reasonable and relevant in the circumstances.  These assumptions include those in respect of global oil and gas prices, increases in expenditures on natural gas infrastructures, modest global economic growth,  the Company’s ability to execute projects under contract, the continued supply of and stable pricing for commodities used by the Company, the availability of personnel resources sufficient for the Company to operate its businesses, the maintenance of operations in major oil and gas producing regions and the ability of the Company to satisfy all covenants under its Credit Facilities and the Senior Notes. The Company believes that the expectations reflected in the forward looking information are based on reasonable assumptions in light of currently available information.  However, should one or more risks materialize or should any assumptions prove incorrect, then actual results could vary materially from those expressed or implied in the forward looking information included in this document and the Company can give no assurance that such expectations will be achieved. When considering the forward looking information in making decisions with respect to the Company, readers should carefully consider the foregoing factors and other uncertainties and potential events.  The Company does not assume the obligation to revise or update forward looking information after the date of this document or to revise it to reflect the occurrence of future unanticipated events, except as may be required under applicable securities laws. To the extent any forward looking information in this document constitutes future oriented financial information or financial outlooks, within the meaning of securities laws, such information is being provided to demonstrate the potential of the Company and readers are cautioned that this information may not be appropriate for any other purpose. Future oriented financial information and financial outlooks, as with forward looking information generally, are based on the assumptions and subject to the risks noted above. Shawcor will be hosting a Shareholder and Analyst Conference Call and Webcast on Wednesday May 10th, 2017 at 10:00AM ET, which will discuss the Company’s Fourth Quarter Financial Results. To participate via telephone, please dial 1-877-776-4039 or 1-315-625-6955 and enter passcode 7617759; alternatively, please go to the following website address to participate via webcast: http://edge.media-server.com/m/p/rc2fpb5y/ Additional information relating to the Company, including its Annual Information Form, is available on SEDAR at www.sedar.com. Please visit our website at www.shawcor.com for further details. The Company reports on certain non-GAAP measures that are used to evaluate its performance and segments, as well as to determine compliance with debt covenants and to manage the capital structure. These non-GAAP measures do not have standardized meanings under IFRS and are not necessarily comparable to similar measures provided by other companies.  The Company discloses these measures because it believes that they provide further information and assist readers in understanding the results of the Company’s operations and financial position. These measures should not be considered in isolation or used in substitution for other measures of performance prepared in accordance with GAAP.  The following is a reconciliation of the non-GAAP measures reported by the Company.                EBITDA and Adjusted EBITDA EBITDA is a non-GAAP measure defined as earnings before interest, income taxes, depreciation and amortization.  Adjusted EBITDA is also a non-GAAP measure defined as EBITDA adjusted for non-operational items. The Company believes that EBITDA and Adjusted EBITDA are useful supplemental measures that provide a meaningful indication of the Company's results from principal business activities prior to the consideration of how these activities are financed or the tax impacts in various jurisdictions. The Company presents Adjusted EBITDA as a measure of EBITDA that excludes the impact of transactions that are outside the Company’s normal course of business. (a) Adjusted EBITDA and EBITDA are used by many analysts in the oil and gas industry as one of several important analytical tools.


News Article | May 9, 2017
Site: globenewswire.com

TORONTO, May 09, 2017 (GLOBE NEWSWIRE) -- Mr. Steve Orr, Chief Executive Officer of Shawcor Ltd. (TSX:SCL) remarked “Shawcor’s financial performance in the first quarter of 2017 continued the trend of quarter over quarter improvement since the low point that was reached in the second quarter of 2016. Results were positively impacted by excellent project execution at our Asia Pacific pipe coating facilities as well as a steady strengthening in market demand for composite pipe and downhole tubular services in North America. Also, the launch of concrete weight coating for the Sur de Texas – Tuxpan ("Tuxpan") project in Altamira, Mexico contributed approximately $20 million of revenue in the quarter.” Mr. Orr added “With production of the concrete coating work for the Tuxpan pipeline project now well underway in Altamira, Mexico, the Company expects to see a renewed acceleration in earnings growth in the second half of 2017 as the Tuxpan project reaches full production. The Company’s current order backlog at $648 million coupled with our expectation that North American well completion activity will continue to improve, provides us with confidence that Shawcor will deliver solid results in 2017. With this positive outlook and the Company’s strong balance sheet, management is in an excellent position to focus on executing our long term growth strategy.” 1 See Section 6.0 – Reconciliation of Non-GAAP Measures for further details and a reconciliation for Adjusted EBITDA. (a) EBITDA is a non-GAAP measure calculated by adding back to net income (loss) the sum of net finance costs, income taxes and amortization of property, plant, equipment and intangible assets. EBITDA does not have a standardized meaning prescribed by GAAP and is not necessarily comparable to similar measures provided by other companies. EBITDA is used by many analysts in the oil and gas industry as one of several important analytical tools. It is also considered important by lenders to the Company. It should not be considered in isolation or used as an alternative to net income or any of the other measures of performance prepared in accordance with GAAP. (b) Attributable to shareholders of the Company. Contract to Provide Pipe Coating Services for Thailand’s Fifth Transmission Pipeline Project On April 7, 2017, the Company announced that its pipe coating division had received a contract in excess of C$40 million from Marubeni-Itochu Tubulars Asia Pte Ltd, a 100% subsidiary of Marubeni-Itochu Steel Inc., to provide internal lining and three layer polyethylene anti-corrosion pipeline coatings for Thailand’s Fifth Transmission Pipeline project. This project is owned by PTT Public Company Limited, a Thai state enterprise company. The pipeline will run through 8 provinces in Thailand and is aimed at reducing risks to electrical power security and easing the delivery of gas from the LNG Terminal in Rayong, Thailand to the Western region. This contract will be executed in Shawcor's coating facilities in Malaysia, and is expected to commence in Q4 2017 and to be completed by Q4 2018. The Company believes that the decline in global oil and gas investment that followed the decrease in oil and gas prices in the second half of 2014 has reached a cycle low and is now beginning to trend towards improvement. Shawcor’s financial performance is closely correlated with oil and gas infrastructure spending and the trend towards stabilization in market demand for the Company’s products and services has enabled the Company to report quarter over quarter gains in revenue and operating income since the trough of the cycle in the second quarter of 2016. The level of improvement in market demand combined with Shawcor’s booked order backlog is expected to enable the Company to deliver solid growth in financial performance in 2017. However, the rate of improvement will vary by region. The region with the most momentum for stronger activity is North America and in particular the number of rigs operating and the number of new oil and gas wells being drilled and completed. As the rig counts in Canada and the USA have improved since early 2016, the demand for the Company’s gathering line pipeline products and services has strengthened. It is expected that increased gathering pipeline construction will lead to new transmission infrastructure investment to accommodate increased production volumes, particularly in west Texas and in the eastern USA. Internationally, economic growth in emerging markets and supportive political mandates to reduce hydrocarbon emissions in electricity generation is leading to investment in new natural gas pipeline infrastructure. Examples include the Company’s Tuxpan undersea natural gas pipeline project in Mexico and the recently awarded PTT 5th Transmission pipeline project in Thailand. These projects are not directly related to new hydrocarbon production and thus oil and gas prices are not determinative in the project investment decision. As a result, the projects are proceeding now at an early stage of the new capital investment cycle. In contrast to natural gas demand driven projects, oil and gas greenfield development projects that enable new hydrocarbon production as well as smaller production sustaining capital projects are lagging as national and international oil companies continue to limit commitments for new projects to ensure that capital spending is in line with reduced operating cash flow. However, capital investments will eventually be required to offset depleting production with resulting growth in demand for Shawcor’s international products and services beyond 2017. Further detail on the outlook for the Pipeline and Pipe Services segment by region and in the Petrochemical and Industrial segment is set out below. Market demand in Shawcor’s North American Pipeline segment businesses is closely tied to well completion activity in North America which drives the demand for small diameter pipe coating and joint protection, composite pipe for gathering line applications, OCTG pipe inspection and refurbishment and gathering line girth weld inspection. Demand for these products and services is expected to fluctuate with changes in global oil and gas prices and the resulting volume of wells drilled and completed. A persistent improvement in drilling rig counts in North America since the second quarter of 2016 has enabled a modest improvement in revenue for Shawcor’s North American Pipeline segment businesses and this trend is expected to continue in 2017. Beyond 2017, the Company expects that the North American Pipeline and Pipe Services segment will benefit from the build of new pipeline infrastructure in the form of tie-back infrastructure in the Gulf of Mexico and new onshore large diameter transmission lines to support increasing production of shale oil and the export of natural gas to Mexico and internationally through LNG. With the launch of concrete weight coating operations in Altamira, Mexico on the Tuxpan project, the Company expects revenue in the Latin America Pipeline segment region to provide strong growth with full production from the two mobile plants expected to be reached by the end of the second quarter. At March 31, 2017, the Company has booked revenue relating to the Tuxpan project included in the backlog of approximately $340 million to be executed from the second quarter of 2017 to the first quarter of 2018. Shawcor’s EMAR Pipeline segment region has been the Company’s region most impacted by the continued deferral of capital spending on new pipeline infrastructure by national and international oil companies. Although project engineering and bidding activity remains very strong in the region, and the Company is pursuing significant revenue opportunities for girth weld inspection, pipeline joint protection and pipe end preservation on both the Turk Stream and Nord Stream 2 pipelines, these opportunities are not likely to benefit revenue until 2018 or later. The Company’s Asia Pacific region has benefited over the past two quarters from the execution of the flow assurance work for the Shah Deniz project and the anti-corrosion coating for pipe destined for Mexico for the Tuxpan project. With the region’s involvement in the coating of these projects now complete, revenue will decrease as project activity will be limited until the PTT 5th Transmission pipeline project commences later in the year. Shawcor’s Petrochemical and Industrial segment businesses continue to deliver steady growth in revenue and earnings based on consistent demand growth in the North American and European automotive, industrial and nuclear refurbishment markets served by the segment. This trend is expected to continue in 2017 as new capacity for control cable and sealing and insulation products enters production and relieves capacity constraints that are currently limiting revenue growth. The Company’s order backlog consists of firm customer orders only and represents the revenue the Company expects to realize on booked orders over the succeeding twelve months. The Company reports the twelve month billable backlog because it provides a leading indicator of significant changes in consolidated revenue. The order backlog at March 31, 2017 of $648 million was in line with the order backlog of $650 million at December 31, 2016. Revenue generated in the quarter from backlog orders was offset by new orders and the movement of a portion of the booked order for the Tuxpan project in Mexico that is planned for execution in the first quarter of 2018. In addition to the backlog, the Company closely monitors its bidding activity and the value of outstanding firm bids is currently in excess of $600 million. In addition, the Company has provided budgetary estimates and is currently working with customers on projects with aggregate values of approximately $1.6 billion. Although the Company cannot be certain on the timing of these projects, they do represent a diverse portfolio of opportunities to sustain and grow the backlog in 2017 and beyond. The following table sets forth revenue by reportable operating segment for the following periods: (a) Represents the elimination of the inter-segment sales between the Pipeline and Pipe Services segment and the Petrochemical and Industrial segment. Consolidated revenue increased 9%, or $30.6 million, from $329.2 million during the fourth quarter of 2016 to $359.7 million during the first quarter of 2017, due to increases of $22.8 million in the Pipeline and Pipe Services segment and $8.0 million in the Petrochemical and Industrial segment. Revenue increased by 8% in the Pipeline and Pipe Services segment, or $22.8 million, from $286.2 million in the fourth quarter of 2016 to $309.0 million in the first quarter of 2017, due to higher activity levels in Asia Pacific, Latin America and North America, partially offset by lower volumes in the Europe, Middle East, Africa and Russia ("EMAR") region. See Section 3.1 – Pipeline and Pipe Services Segment for additional disclosure with respect to the change in revenue in the Pipeline and Pipe Services segment. In the Petrochemical and Industrial segment, revenue was higher by $8.0 million, or 19%, in the first quarter of 2017, compared to the fourth quarter of 2016, due to higher activity levels in all regions. See Section 3.2 – Petrochemical and Industrial Segment for additional disclosure with respect to the change in revenue in the Petrochemical and Industrial segment. Consolidated revenue decreased by $5.8 million, or 2%, from $365.6 million during the first quarter of 2016, to $359.7 million during the first quarter of 2017, due to a decrease of $7.9 million in the Pipeline and Pipe Services segment, partially offset by a $2.5 million increase in the Petrochemical and Industrial segment. In the Pipeline and Pipe Services segment, revenue in the first quarter of 2017 was $309.0 million, or 3% lower than in the first quarter of 2016, due to decreased activity levels in EMAR, partially offset by higher activity levels in North America, Latin America and Asia Pacific. See Section 3.1 – Pipeline and Pipe Services Segment for additional disclosure with respect to the change in revenue in the Pipeline and Pipe Services segment. In the Petrochemical and Industrial segment, revenue increased by $2.5 million, or 5%, during the first quarter of 2017, compared to the first quarter of 2016, due to increased activity levels in all regions. See Section 3.2 – Petrochemical and Industrial Segment for additional disclosure with respect to the change in revenue in the Petrochemical and Industrial segment. The following table sets forth operating income and operating margin for the following periods: (a) Operating margin is defined as operating income divided by revenue and is a non-GAAP measure. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. Operating income increased by $4.1 million, from an operating income of $21.7 million during the fourth quarter of 2016 to operating income of $25.8 million in the first quarter of 2017. Operating income was positively impacted by increases in gross profit of $22.0 million. This was partially offset by an increase in selling, general and administrative ("SG&A") expenses of $7.3 million, a $1.3 million increase in research and development expenses, a $2.8 million increase in net foreign exchange losses and a $5.6 million in gain on sale of land recorded in the fourth quarter of 2016. The increase in gross profit resulted from the higher revenue, as explained above, and a 3.3 percentage point increase in the gross margin from the fourth quarter of 2016. The increase in the gross margin percentage was primarily due to product and project mix, labour cost efficiencies due to higher facility utilization and increased absorption of manufacturing overheads and a $4.8 million reduction in the carrying value of inventory recorded in the fourth quarter of 2016. SG&A expenses increased by $7.3 million, from $71.8 million in the fourth quarter of 2016 to $79.0 million in the first quarter of 2017, primarily due to an increase in personnel related and management incentive compensation expenses of $4.6 million and an increase of $5.7 million due to reductions in provisions for import duties and decommissioning obligations recorded in the fourth quarter of 2016. This was partially offset by a $3.0 million reduction in warranty provisions and professional fees. Operating income increased by $9.9 million, from an operating income of $16.0 million in the first quarter of 2016 to an operating income of $25.8 million during the first quarter of 2017. Operating income was impacted by an increase in gross profit of $2.7 million, decreases of $4.8 million in SG&A expenses, $0.7 million in research and development expenses, $1.4 million in amortization of property, plant, equipment and intangible assets and $0.3 million in net foreign exchange losses. The increase in gross profit resulted from a 1.3 percentage point increase in gross margin, partially offset by the lower revenue, as explained above. The increase in the gross margin percentage was primarily attributable to product and project mix. SG&A expenses in the first quarter of 2017 decreased by $4.8 million compared to the first quarter of 2016, primarily due to a $3.6 million reduction in personnel related expenses, a $1.8 million decrease in professional fees, a decrease in rental related expenses for facilities of $2.4 million and a net reduction in other costs of $1.4 million. Partially offsetting these expense reductions was an increase in management incentive compensation expenses of $4.4 million. The following table sets forth the components of finance costs, net for the following periods: In the first quarter of 2017, net finance costs were $5.6 million, compared to a net finance cost of $2.9 million during the fourth quarter of 2016. The increase in net finance costs was due to a decrease in interest income of $1.8 million on short term deposits and other receivables, a $0.4 million increase in interest expense on long term debt and higher interest on bank borrowings and facilities of $0.6 million. In the first quarter of 2017, net finance costs were $5.6 million, compared to a net finance cost of $4.7 million during the first quarter of 2016. The increase in net finance costs was primarily a result of higher interest expense on bank borrowings and facilities. The following table sets forth the income tax expenses for the following periods: The Company recorded an income tax expense of $2.5 million (14% of income before income taxes) in the first quarter of 2017, compared to an income tax expense of $7.0 million (20% of income before income taxes) in the fourth quarter of 2016. The effective tax rate in the first quarter of 2017 was lower than the expected income tax rate of 27% primarily due to a portion of the Company’s taxable income being earned in lower tax jurisdictions and losses being generated in higher tax jurisdictions. The Company recorded an income tax expense of $2.5 million (14% of income before income taxes) in the first quarter of 2017, compared to an income tax expense of $2.6 million (24% of income before income taxes) in the first quarter of 2016. The effective tax rate in the first quarter of 2017 was lower than the expected income tax rate of 27% primarily due to a portion of the Company’s taxable income being earned in lower tax jurisdictions and losses being generated in higher tax jurisdictions. The following table sets forth the significant currencies in which the Company operates and the average foreign exchange rates for these currencies versus Canadian dollars, for the following periods: The following table sets forth the impact on revenue, operating income and net income (attributable to shareholders of the Company), compared with the prior quarter and the prior year period, as a result of foreign exchange fluctuations on the translation of foreign currency operations: In addition to the translation impact noted above, the Company recorded a foreign exchange loss of $1.4 million in the first quarter of 2017, compared to a foreign exchange loss of $1.7 million for the comparable period in the prior year, as a result of the impact of changes in foreign exchange rates on monetary assets and liabilities and short term foreign currency intercompany loans within the group, net of hedging activities. 2.6  Net Income (attributable to shareholders of the Company) Net income decreased by $12.1 million, from a net income of $27.3 million during the fourth quarter of 2016 to a net income of $15.1 million during the first quarter of 2017. This was mainly due to a $19.2 million arbitration award against Wasco Energy recorded in the fourth quarter of 2016 and a $2.8 million increase in finance costs.  This was partially offset by the $4.1 million increase in operating income, as explained in section 2.2 above, and a $4.4 million decrease in income tax expense. Net income increased by $7.7 million, from $7.5 million during the first quarter of 2016 to $15.1 million during the first quarter of 2017. This was mainly due to the $9.9 million increase in operating income, as explained in section 2.2 above. This was partially offset by a $0.9 increase in finance costs and a $2.0 million higher loss from investments in associates. The following table sets forth, by geographic location, the revenue, operating income and operating margin for the Pipeline and Pipe Services segment for the following periods: (a) Operating margin is defined as operating income divided by revenue and is a non-GAAP measure. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. Revenue in the first quarter of 2017 increased by $22.8 million to $309.0 million, from $286.2 million in the fourth quarter of 2016. Revenue benefitted from higher activity levels in Asia Pacific, Latin America and North America, partially offset by lower volumes in EMAR: In the first quarter of 2017, operating income was $24.6 million compared to an operating income of $11.7 million in the fourth quarter of 2016, an increase of $12.9 million. The increase in operating income was primarily due to the $18.3 million increase in gross profit due to the increase in revenue, as explained above, and a 3.5 percentage point increase in gross margin. The increase in gross margin was due to favourable project mix, labour efficiencies due to higher facility utilization and increased manufacturing overhead absorption and a $4.8 million reduction in the carrying value of inventory recorded in the fourth quarter of 2016. This was partially offset by higher SG&A expenses, explained in section 2.2 above, and the $5.6 million gain on sale of land recorded in the fourth quarter of 2016. Revenue in the first quarter of 2017 was $309.0 million, a decrease of $7.9 million, or 3%, from $317.0 million in the comparable period of 2016. Segment revenue was adversely affected by the impact on translation of foreign operations, as noted in section 2.5 above, and lower activity levels in EMAR, partially offset by higher revenue in North America, Latin America and Asia Pacific: In the first quarter of 2017, operating income was $24.6 million compared to $16.2 million in the first quarter of 2016, an increase of $8.4 million. This increase was attributable primarily to a reduction in SG&A expenses, decreases in research and development expenses and amortization of property, plant, equipment and intangible assets, as explained in section 2.2 above. This was partially offset by a reduction in gross profit of $1.1 million as a result of a decrease in revenue of $7.9 million, as explained above, partially offset by a 0.5 percentage point increase in gross margin. The increase in gross margin was due to favourable project mix. The following table sets forth, by geographic location, the revenue, operating income and operating margin for the Petrochemical and Industrial segment for the following periods: (a) Operating margin is defined as operating income divided by revenue and is a non-GAAP measure. Non-GAAP measures do not have standardized meanings under GAAP and are not necessarily comparable to similar measures provided by other companies. In the first quarter of 2017, revenue increased by $8.0 million, or 19%, to $51.4 million, compared to the fourth quarter of 2016, primarily due to increased shipments of heat shrink tubing product, particularly in the automotive sector, and higher activity levels for wire and cable products. Operating income of $9.6 million in the first quarter of 2017 was $3.4 million, or 54%, higher than in the fourth quarter of 2016. The increase in operating income was primarily due to an increase in gross profit of $3.6 million due to the increased revenue, as explained above, and a 2.4 percentage point increase in gross margin. The increase in gross margin was due to favourable product mix and labour efficiencies due to higher facility utilization and increased manufacturing overhead absorption. Revenue in the first quarter of 2017 increased by $2.5 million, or 5%, compared to the first quarter of 2016. Revenue was impacted by increased shipments of heat shrink tubing product, particularly in the automotive sector, and by higher activity levels for wire and cable products. Operating income in the first quarter of 2017 was $9.6 million compared to $7.6 million in the first quarter of 2016, an increase of $2.1 million, or 27%. The increase in operating income was primarily due to an increase in gross profit of $2.7 million as a result of an increase in revenue of $2.5 million, as explained above, and a 4.0 percentage point increase in gross margin. The increase in gross margin was due to favourable product mix and labour efficiencies due to higher facility utilization and increased manufacturing overhead absorption. Financial and corporate costs include corporate expenses not allocated to the operating segments and other non-operating items, including foreign exchange gains and losses on foreign currency denominated cash and working capital balances. The corporate division of the Company only earns revenue that is considered incidental to the activities of the Company. As a result, it does not meet the definition of a reportable operating segment as defined under IFRS. The following table sets forth the Company’s unallocated financial and corporate expenses, before foreign exchange gains and losses, for the following periods: Financial and corporate costs increased by $3.8 million from $3.2 million during the fourth quarter of 2016 to $7.0 million in the first quarter of 2017. The increase was primarily due to an increase in personnel related and management incentive compensation expenses of $2.0 million. In addition, in the fourth quarter of 2016, $1.5 million in provisions for pension expense and professional fees were reversed. Financial and corporate costs increased by $0.9 million from the first quarter of 2016 to $7.0 million in the first quarter of 2017. The increase was primarily due to higher personnel related and stock based and long term management incentive expenses of $2.6 million. This was partially offset by a $1.5 million decrease in professional consulting and legal fees. This document includes certain statements that reflect management’s expectations and objectives for the Company’s future performance, opportunities and growth, which statements constitute “forward‑looking information” and “forward looking statements” (collectively “forward looking information”) under applicable securities laws.  Such statements, other than statements of historical fact, are predictive in nature or depend on future events or conditions. Forward looking information involves estimates, assumptions, judgments and uncertainties.  These statements may be identified by the use of forward‑looking terminology such as "may", "will", "should", "anticipate", "expect", "believe", "predict", "estimate", "continue", "intend", "plan" and variations of these words or other similar expressions.  Specifically, this document includes forward looking information in the Outlook section and elsewhere in respect of, among other things, the achievement of key performance objectives, the incurrence of additional capital expenditures as necessary to respond to market demand growth and to facilitate growth in new markets, the increase in investment in net working capital, the timing of major project activity, the expected improvement in consolidated revenues and earnings in 2017 from 2016, the growth in revenue and earnings in the Pipeline and Pipe Services segment and in the Petrochemical and Industrial segment of the Company’s business, the sufficiency of resources, capacity and capital to meet market demand, to meet contractual obligations and to execute the Company’s development and growth strategy, the impact of the existing order backlog and other factors on the Company’s revenue and operating income, the impact of global economic activity on the demand for the Company's products, the impact of the improvement in global oil and gas commodity prices on the level of industry investment in oil and gas infrastructure, the impact of changing energy demand, supply and prices, the impact and likelihood of changes in competitive conditions in the markets in which the Company participates, the adequacy of the Company’s existing accruals in respect of environmental compliance and in respect of litigation matters and other claims generally, the level of payments under the Company's performance bonds  and the expected development in the Company’s order backlog. Forward looking information involves known and unknown risks and uncertainties that could cause actual results to differ materially from those predicted by the forward‑looking information.  We caution readers not to place undue reliance on forward looking information as a number of factors could cause actual events, results and prospects to differ materially from those expressed in or implied by the forward looking information.  Significant risks facing the Company include, but are not limited to: the impact on the Company of reduced demand for its products and services, including the suspension or cancellation of existing contracts, as a result of lower investment in global oil and gas extraction and transportation activity following the previous declines in the global price of oil and gas, long term changes in global or regional economic activity and changes in energy supply and demand, which impact on the level of global pipeline infrastructure construction; exposure to product and other liability claims; shortages of or significant increases in the prices of raw materials used by the Company; compliance with environmental, trade and other laws; political, economic and other risks arising from the Company’s international operations; and fluctuations in foreign exchange rates. These statements of forward looking information are based on assumptions, estimates and analysis made by management in light of its experience and perception of trends, current conditions and expected developments as well as other factors believed to be reasonable and relevant in the circumstances.  These assumptions include those in respect of global oil and gas prices, increases in expenditures on natural gas infrastructures, modest global economic growth,  the Company’s ability to execute projects under contract, the continued supply of and stable pricing for commodities used by the Company, the availability of personnel resources sufficient for the Company to operate its businesses, the maintenance of operations in major oil and gas producing regions and the ability of the Company to satisfy all covenants under its Credit Facilities and the Senior Notes. The Company believes that the expectations reflected in the forward looking information are based on reasonable assumptions in light of currently available information.  However, should one or more risks materialize or should any assumptions prove incorrect, then actual results could vary materially from those expressed or implied in the forward looking information included in this document and the Company can give no assurance that such expectations will be achieved. When considering the forward looking information in making decisions with respect to the Company, readers should carefully consider the foregoing factors and other uncertainties and potential events.  The Company does not assume the obligation to revise or update forward looking information after the date of this document or to revise it to reflect the occurrence of future unanticipated events, except as may be required under applicable securities laws. To the extent any forward looking information in this document constitutes future oriented financial information or financial outlooks, within the meaning of securities laws, such information is being provided to demonstrate the potential of the Company and readers are cautioned that this information may not be appropriate for any other purpose. Future oriented financial information and financial outlooks, as with forward looking information generally, are based on the assumptions and subject to the risks noted above. Shawcor will be hosting a Shareholder and Analyst Conference Call and Webcast on Wednesday May 10th, 2017 at 10:00AM ET, which will discuss the Company’s Fourth Quarter Financial Results. To participate via telephone, please dial 1-877-776-4039 or 1-315-625-6955 and enter passcode 7617759; alternatively, please go to the following website address to participate via webcast: http://edge.media-server.com/m/p/rc2fpb5y/ Additional information relating to the Company, including its Annual Information Form, is available on SEDAR at www.sedar.com. Please visit our website at www.shawcor.com for further details. The Company reports on certain non-GAAP measures that are used to evaluate its performance and segments, as well as to determine compliance with debt covenants and to manage the capital structure. These non-GAAP measures do not have standardized meanings under IFRS and are not necessarily comparable to similar measures provided by other companies.  The Company discloses these measures because it believes that they provide further information and assist readers in understanding the results of the Company’s operations and financial position. These measures should not be considered in isolation or used in substitution for other measures of performance prepared in accordance with GAAP.  The following is a reconciliation of the non-GAAP measures reported by the Company.                EBITDA and Adjusted EBITDA EBITDA is a non-GAAP measure defined as earnings before interest, income taxes, depreciation and amortization.  Adjusted EBITDA is also a non-GAAP measure defined as EBITDA adjusted for non-operational items. The Company believes that EBITDA and Adjusted EBITDA are useful supplemental measures that provide a meaningful indication of the Company's results from principal business activities prior to the consideration of how these activities are financed or the tax impacts in various jurisdictions. The Company presents Adjusted EBITDA as a measure of EBITDA that excludes the impact of transactions that are outside the Company’s normal course of business. (a) Adjusted EBITDA and EBITDA are used by many analysts in the oil and gas industry as one of several important analytical tools.


Photoconversion tunability of fluorophore dye is of great interest in cancer nanomedicine such as fluorescence imaging, photodynamic therapy (PDT), and photothermal therapy (PTT). Herein, this paper reports wavelength-dependent photoconversional polymeric vesicles of boron dipyrromethene (Bodipy) fluorophore for either PDT under 660 nm irradiation or PTT under 785 nm irradiation. After being assembled within polymeric vesicles at a high drug loading, Bodipy molecules aggregate in the conformations of both J-type and H-type, thereby causing red-shifted absorption into near-infrared region, ultralow radiative transition, and ideal resistance to photobleaching. Such vesicles further possess enhanced blood circulation, preferable tumor accumulation, as well as superior cell uptake as compared to free Bodipy. In particular, the vesicles mainly generate abundant intracellular singlet oxygen for PDT treatment under 660 nm irradiation, while they primarily produce a potent hyperthermia for PTT with tumor ablation through singlet oxygen-synergized photothermal necrosis under 785 nm irradiation. This approach provides a facile and general strategy to tune photoconversion characteristics of fluorophore dyes for wavelength-dependent photoinduced cancer therapy.

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