Tree Island Steel Announces Second Quarter 2014 Results

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Aug. 7, 2014) - Tree Island Steel Ltd. (TSX:TSL) -

Q2 2014 Financial Highlights⁽¹⁾:

• Volumes up by 24.8% to 36,398 tons
• Revenue increases by 17.7% to $47.8 million
• Gross Profit amounts to $4.6 million, or 9.7% of revenues
• EBITDA⁽²⁾ (before foreign exchange) at $1.9 million
• $0.7 million invested in staffing, training and maintenance to support revenue growth and continued demand

Tree Island Steel Ltd. ("Tree Island" or the "Company") (TSX:TSL) announced today its financial results for the three and six month periods ended June 30, 2014⁽¹⁾.

For the three-month period ended June 30, 2014, revenues increased by 17.7% to $47.8 million versus $40.6 million for the same period last year. Volumes also increased by 24.8% to 36,398 tons, primarily driven by continued demand in a number of the Company's end-markets. During the quarter, the Company incurred costs of $0.7 million due to growth related investments associated with the ramp up in volumes and the training of staff, as well as maintenance of operations, to be well positioned for the continued demand in certain of the Tree Island's key end markets. As a result, gross profit amounted to $4.6 million versus $5.4 million for the same period in 2013. Gross margin per ton for the quarter was $127 per ton versus $185 per ton for the same period in 2013. Our gross profit as a percentage of revenue was 9.7% in the quarter versus 13.3% in Q2 2013. The impact to EBITDA was a decrease to $1.9 million from $2.9 million during the corresponding period in 2013.

For the six month period ended June 30, 2014, revenues amounted to $93.7 million on 71,534 tons, compared to $78.7 million on 56,762 tons during the same period in 2013. The higher revenues in 2014 reflect increased volumes particularly in the Industrial and Agricultural market segments. The growth in revenue was partially reduced by price adjustments driven by competitive factors in certain business lines coupled with product mix changes. Growth in volumes and operating leverage contributed positively to our gross profit for the period; however, the year-to-date gross profit was impacted by costs for training and maintenance of $0.9 million, compounded by the strengthening of the US dollar raw material costs for sales into Canada. The net effect was that gross profit for the six month period increased to $9.9 million at a margin of 10.6%, compared to $9.6 million and a margin of 12.2%, while gross profit per ton decreased to $139 per ton versus $170 per ton in the corresponding period in 2013. An increase in compensation related items impacted our EBITDA during the period which decreased by 12.6% to $4.1 million versus $4.7 million in 2013.

"The demand for our products, coupled with our quality and brands across our markets, continue to fuel our growth. At the same time, we keep our focus on the pace of momentum in our key end markets and look to keep a diversified mix of products to address the evolving demand in those markets," said Dale R. MacLean, President and CEO of Tree Island Steel. "We may continue to make similar investments to support the future profitable growth of Tree Island, we have confidence that these costs will pay off and further strengthen the leverage in our business model, generating higher returns in future periods. The training and maintenance costs are an important part of building our base to support the sustainable revenue growth and profitability of Tree Island."

Amar S. Doman, Chairman of Tree Island Steel noted, "The costs for growing the Company have introduced short term pressure on the margins. Profitability remains a key focus for the Company while balancing the need to prepare for improving market dynamics. The costs incurred during the quarter are an investment in the continued growth and future of Tree Island."

About Tree Island Steel

Tree Island Steel, headquartered in Richmond, British Columbia, since 1964, through its four operating facilities in Canada and the United States, produces wire products for a diverse range of industrial, residential construction, commercial construction, agricultural, and specialty applications. Its products include galvanized wire, bright wire; a broad array of fasteners, including packaged, collated and bulk nails; stucco reinforcing products; concrete reinforcing mesh; fencing and other fabricated wire products. The Company markets these products under the Tree Island, Halsteel, K-Lath, Industrial Alloys, TI Wire, and Tough Strand brand names. The Company also owns and operates a China-based company that assists the international sourcing of products to Tree Island and its customers.

Forward-Looking Statements

This press release includes forward-looking information with respect to Tree Island including its business, operations and strategies, as well as financial performance and conditions. The use of forward-looking words such as, "may," "will," "expect" or similar variations generally identify such statements. Any statements that are contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Although management believes that expectations reflected in forward-looking statements are reasonable, such statements involve risks and uncertainties including risks and uncertainties discussed under the heading "Risk Factors" in Tree Island's most recent annual information form and management discussion and analysis.

The forward looking statements contained herein reflect management's current beliefs and are based upon certain assumptions that management believes to be reasonable based on the information currently available to management. By their very nature, forward looking statements involve inherent risks and uncertainties, both general and specific, and a number of factors could cause actual events or results to differ materially from the results discussed in the forward looking statements. In evaluating these statements, prospective investors should specifically consider various factors including the risks outlined in the Company's most recent annual information form and management discussion and analysis which may cause actual results to differ materially from any forward looking statement. Such risks and uncertainties include, but are not limited to: general economic, market and business conditions, the cyclical nature of our business and demand for our products, financial condition of our customers, competition, volume and price pressure from import competition, deterioration in the Company's liquidity, disruption in the supply of raw materials, volatility in the costs of raw materials, significant exposure to the Western United States due to lack of geographic diversity, dependence on the construction industry, transportation costs, foreign exchange fluctuations, leverage and restrictive covenants, labour relations, trade actions, dependence on key personnel and skilled workers, reliance on key customers, intellectual property risks, energy costs, un-insured loss, credit risk, operating risk, management of growth, changes in tax, environmental and other legislation, and other risks and uncertainties set forth in our publicly filed materials.

This press release has been reviewed by the Company's Board of Directors and its Audit Committee, and contains information that is current as of the date of this press release, unless otherwise noted. Events occurring after that date could render the information contained herein inaccurate or misleading in a material respect. Readers are cautioned not to place undue reliance on this forward-looking information and management of the Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise except as required by applicable securities laws. 

⁽¹⁾ Please refer to our Q2 2014 MD&A for further information.

⁽²⁾ References made above to "EBITDA" are to operating profit plus depreciation and references to "Adjusted Net Income" are to net income per IFRS adjusted for certain non-cash items including non-cash financing expenses, changes in fair value of convertible instruments, and deferred income tax. EBITDA is a measure used by many investors to compare issuers on the basis of ability to generate cash flows from operations. Adjusted Net Income is a measure for investors to understand the impact of significant non-cash items that affect our results from operations. Neither EBITDA nor Adjusted Net Income are earnings measures recognized by IFRS and do not have a standardized meaning prescribed by IFRS. We believe that EBITDA and Adjusted Net Income are important supplemental measure in evaluating the Company's performance. You are cautioned that EBITDA and Adjusted Net Income should not be construed as alternatives to net income or loss, determined in accordance with IFRS, or as indicators of performance. Our method of calculating EBITDA and Adjusted Net Income may differ from methods used by other issuers and, accordingly, our EBITDA or Adjusted Net Income may not be comparable to similar measures presented by other issuers.