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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.


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.


TORONTO, April 07, 2017 (GLOBE NEWSWIRE) -- Shawcor Ltd. (TSX:SCL) today announced that its pipe coating division has 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. Shawcor Ltd. is a global energy services company specializing in products and services for the pipeline and pipe services segment of the oil and gas industry and related products for the petrochemical and industrial market. The Company operates through a global network of fixed and mobile manufacturing and service facilities and is valued for its integrity, technology and proven capability to execute the most complex projects in its industry. This news release contains forward-looking information within the meaning of applicable securities laws. Words such as "may", "will", "should", "anticipate", "plan", "expect", "believe", "predict", "estimate" or similar terminology are used to identify forward-looking information. This forward-looking information is based on assumptions, estimates and analysis made in the light of the Company's experience and its perception of trends, current conditions and expected developments, as well as other factors that are believed by the Company to be reasonable and relevant in the circumstances. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from those predicted, expressed or implied by the forward-looking information. The forward-looking information is provided as of the date of this news release and the Company does not assume any obligation to update or revise the forward-looking information to reflect new events or circumstances, except as required by law.


Wuttimongkolchai A.,PTT Public Company Ltd
Annual Fuels and Lubes Asia Conference and Exhibition | Year: 2016

Thailand has set the target of lowering CO2 by 20% compared with 2005 within 2025 at cOP21 meeting in Paris. The combining of five energy policies, i.e., PDP, EEP, ADEP, Oil Plan and Gas Plan, have been mandated since 2015 for supporting the stringent target. A presentation covers the new energy policy and planning; new 2016 vehicle excise tax; trend of vehicle technology; trends of fuels and lubricants; and Thailand situation on biofuel and lubricant. This is an abstract of a paper presented at the F+L Week 2016 (Singapore 3/8-11/2016).


Patent
PTT Public Company Ltd | Date: 2013-04-09

An electromagnetic oil tank heating unit and an electromagnetic oil tank heating system comprising multiple units of electromagnetic oil tank heating units is provided. Each electromagnetic oil tank heating unit comprises a generator capable of generating high frequency electrical current connected to a transformer and a cooling unit, an induction plate with induction coil embedded therein, connected to the transformer and at least one cooling unit, providing cooling to the transformer and the induction plate. The generator, the transformer, the induction plate and the cooling unit are arranged on a frame equipped with wheels to permit mobility of the unit to allow moving the heating unit to a specific location along the length of an oil tank. The frame is configured to include a mechanical means allowing the induction plate supported thereon to move up and down, and forward and backward relative to the oil tank.


Patent
PTT Public Company Ltd | Date: 2014-10-15

The present invention discloses an electromagnetic oil tank heating unit (100) and an electromagnetic oil tank heating system (200) comprising multiple units of electromagnetic oil tank heating unit (100). Each electromagnetic oil tank heating unit (100) comprising a generator (20) capable of generating high frequency electrical current connected to a transformer (25) and a cooling unit (40, 40), an induction plate (30), with induction coil (35) embedded therein, connected to the transformer (25) and at least one cooling unit (40, 40) providing cooling to the transformer (25) and the induction plate (30). The generator (20), the transformer (25), the induction plate (30), the cooling unit (40, 40) are arranged on a frame (45) equipped with wheels (50) to permit mobility of the unit so as to allow moving the heating to a specific location along the length of an oil tank (55). The frame (45) is configured to include a mechanical means allowing the induction plate (30) supported thereon to move up and down, and forward and backward relative to the oil tank (55).


Sealing apparatus for applying corrosion prevention compound in the gap between flanges without using heat consists of 3 units including hydraulic power unit, compound injection cylinder unit, and flange belt unit. The present invention is used to apply corrosion prevention compound in the gap between flanges without using heat for melting the compound before sealing. The compound injection cylinder unit comprises two integrally formed cylinders sharing one connecting rod wherein the lower cylinder defines the hydraulic cylinder and the upper cylinder defines the compound injection cylinder. The compound injection cylinder unit is vertically formed on a pushcart provided with wheels for manual transportation. A threaded coupler is provided on top of the lid of the compound injection cylinder for connection with a hose for transferring the compound to the inlet on the flange belt unit. The flange belt unit is provided in various diameters from 2-24 inches. The application of corrosion prevention compound in the gap between flanges is carried out by applying the pressure from the hydraulic cylinder powered by the hydraulic power unit to inject the compound in the cylinder through the hose into the gap between the flanges of pipes.

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