First Quarter Summary
Construction of second French soil treatment facility, located in Lyon, France, on schedule and expected to be operational in the second quarter of 2009
EnGlobe had a good first quarter and demonstrated the strength and positive momentum of the Corporation in the challenging economic environment. Our first quarter results underline both the success of EnGlobe as it continues to grow and secure new business opportunities and the positive benefits of our reorganization plan announced last year said Andre Heroux, chief executive officer (CEO) of EnGlobe. Going forward, our priority remains to focus on improving our operational efficiency, increasing productivity, and aggressively pursuing growth opportunities in our Site Assessment and Remediation segment. We are currently completing the construction of our second soil treatment facility in France, located near Lyon, which is expected to be fully operational by mid-May 2009. In addition, we have lowered our costs over the past several quarters and I expect that we will see further benefits from these efforts as 2009 progresses added Heroux.
Financial Highlights for the Three Months Ended March 31, 2009
The corporation’s increase in revenue was driven by significant growth in the Site Assessment and Remediation segment (SAR). In particular, robust SAR activities in Northern Canada and Alberta and the contribution from Celtic Technologies Limited (Celtic), which was acquired in March 2008, led to higher revenue for the segment. Celtic contributed CAD4.4 million in revenues in the first quarter.
However, significant revenue gains from the SAR segment were offset by a lower revenue contribution from the Organic Waste Management segment (OWM). OWM experienced a planned decrease of revenue that totaled CAD3.6 million in the first quarter. As part of the corporation’s previously communicated reorganization plan, OWM is now concentrating on activities that generate positive financial contribution. This has resulted in the progressive phasing out of certain contracts and business activities, which has translated into lower OWM revenues, but higher OWM margins with reduced risk.
The Tank Testing and Calibration segment’s revenue was slightly lower than the revenue generated in the same period in 2008.
Gross operating profit in the first quarter was CAD6.4 million compared with CAD5.4 million in the quarter ended March 31, 2008, an increase of 17.5%. As a percentage of sales, the gross operating profit margin for the first quarter was 25.8% compared with 22.4% for the same period in 2008. The gross operating profit margin improvement was primarily attributable to higher margins from the SAR segment (from Canadian operations in particular including the Montreal soil treatment facility), as well as positive margin contribution from the OWM segment.
Cash provided by operating activities in the first quarter was CAD2.5 million compared with operating cash flow of CAD4.7 million in the same period last year. Excluding the variation in the non cash working capital items, operating cash flow improved by 2.4 million.
We are pleased with our first quarter results and believe we are realizing the benefits from our fall 2008 restructuring plan announced in 2008 said Andre Heroux, president and CEO. EnGlobe remains focused on controlling costs and improving our cash management activities while strengthening our business execution skills.
