Ms. Diane Reko reports

REKO REPORTS RESULTS FOR SECOND QUARTER OF FISCAL 2024

Reko International Group Inc. has released results for its second quarter of fiscal 2024. All amounts are in thousands of dollars, except per-share amounts.

Consolidated sales in the second quarter were $11,948, compared with $11,666 in the same quarter of the prior year, an increase of $282, or 2.4 per cent. Year-to-date sales for fiscal 2024 were $25,651, compared with $25,462 in the previous fiscal year, an improvement of 0.7 per cent, or $189.

Earned revenue for the quarter declined $463, or 5.6 per cent, compared with the same period of the prior year. This decrease was driven by material and subcontracting cost overruns for projects initiated, progressed or completed during the quarter and persistent pricing pressures.

Gross profit for the quarter ended Jan. 31, 2024, was $1,502, or 12.6 per cent of sales, compared with $2,227, or 19.1 per cent in the preceding year. The decline is attributed to decreased earned revenue and unforeseen challenges affecting labour costs on a certain multiyear fixed-price project. Continued skilled labour shortages have compounded recruitment, retention and throughput challenges, consequently leading to increased labour expenses. This, in turn, has also impacted margins when compared with the prior year.

Selling and administrative (SG&A) expenses were $1,453, or 12.2 per cent of sales, which is improved by $116, or 7.4 per cent, when compared with SG&A expenses of $1,569 in the same period of the prior year.

Net income for the quarter ended Jan. 31, 2024, was $102, or two cents per share, compared with $483, or eight cents a share, in the prior year.

"This quarter reflects the impact of what might be called the perfect storm," stated Diane Reko, chief executive officer. "As we see the impact of a timing failure in the introduction of new electric vehicles, both material and labour costs are rising rapidly while many new projects are on hold. Additionally, fixed-price contracts have impacted margins due to the unexpected labour cost increase rates and skilled labour shortages. We are taking action to improve our margins, but this will require time due to our project timelines and existing contracts."

During the quarter, the company purchased and subsequently cancelled 71,800 shares under the normal course issuer bid, which expired on Jan. 8, 2024, at a net cost of $358. No shares have been repurchased under the renewed bid announced on Jan. 5, 2024.

About Reko International Group Inc.

Reko International Group is a diversified, technology-driven manufacturing company located in Southwestern Ontario, just minutes from the U.S. border. With expertise in robotic automation equipment and precision machining services, Reko is a go-to supplier for companies in the automotive, aerospace, rail, power generation and capital equipment industries. Reko strives to be a pillar and protector of sustainable North American manufacturing and production.