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Atlas Engineered Products Ltd
Symbol AEP
Shares Issued 59,446,981
Close 2024-04-26 C$ 1.49
Market Cap C$ 88,576,002
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ORIGINAL: Atlas Engineered Products Reports 2023 Annual Financial and Operating Results

2024-04-26 12:05 ET - News Release

Atlas Engineered Products Reports 2023 Annual Financial and Operating Results

Canada NewsWire

NANAIMO, BC, April 26, 2024 /CNW/ - Atlas Engineered Products ("AEP" or the "Company") (TSXV: AEP) (OTC Markets: APEUF) is pleased to announce its financial and operating results for the year ended December 31, 2023. All amounts are presented in Canadian dollars.

"2021 and 2022 were marked by pent-up demand, inflated material prices, and never-ending supply chain issues. 2023 was an anticipated correction year in the construction market that was exacerbated further by steadily rising interest rates." said Hadi Abassi, the Company's CEO, President and Founder. "Despite rising interest rates negatively impacting housing starts and intensifying competition, the Company was still able to generate solid revenues, maintain disciplined margin control, and still produce profits while also completing another significant acquisition. It was a busy year in a lot of ways, and we aren't slowing down; we are moving forward to be ready for the house-building expansion Canada requires."

Financial Highlights for Fourth Quarter and Fiscal 2023:

  • On August 23, 2023, the Company acquired Léon Chouinard et Fils Co. Ltd./Ltée. ("LCF") located in New Brunswick, Canada. The shares of LCF were acquired for $26 million in cash plus a working capital adjustment of $3,299,119. The land and buildings of LCF were also acquired by the Company for their appraised value of $2.792 million in cash. The Company financed the LCF acquisition with a term loan and mortgage for $22.4 million, issuing 1,739,129 common shares at a value of $2 million, and the rest with the Company's existing cash generated from operations. During LCF's fiscal year ended December 31, 2022, they generated revenues of just over $25.7 million, net income of just over $6.3 million, and a non-IFRS normalized EBITDA of approximately $9.47 million, resulting in a non-IFRS normalized EBITDA margin of 37%.
  • AEP revenue for the year ended December 31, 2023 was $49,413,675 compared to revenue of $61,899,620 for the year ended December 31, 2022. Revenues decreased due to the stabilization of some material prices (such as lumber and engineered wood products) at significantly lower levels than the prior two years, which are passed along to customers. The market also saw a slowdown in some areas of Canada, mainly in Ontario and recently in some parts of British Columbia as well. This has mainly been due to higher interest rates resulting in the construction industry pausing to assess the effects on new housing demand, which led to reduced housing starts during the year.
  • Gross margin for the year ended December 31, 2023  decreased to 27% compared to gross margin of 32% for the year ended December 31, 2022. Gross margins decreased mainly due to the more competitive market for sales driven by higher interest rates. The Company did a solid job striking a a balance between generating sales and compromising slightly on the gross margin available in a more competitive market. As demand expands, the Company will continue to focus on gross margins as well as revenue generation.
  • Operating expenses increased by $977,616 for the year ended December 31, 2023 to $8,294,053 compared to $7,316,437 for the year ended December 31, 2022. This increase was mainly due to $630,547 of one time, non-recurring cash outlay expenses, such as professional fees and financing charges, incurred in relation to the acquisition. These amounts are included in the operating expenses of the Company, but are added back as one time expenses for the non-IFRS normalized EBITDA noted below. Additional increases are related to non-cash items such as depreciation, amortization and share based payments. Some additional increases, but not considered one-time, resulted from the Company's need to bolster human resources and systems to ensure the Company was ready and able to handle the resulting growth and geographical expansion from the LCF acquisition as well as anticipated future acquisitive growth.
  • Net income after taxes was $3,149,838 for the year ended December 31, 2023 compared to net income after taxes of $8,830,337 for the year ended December 31, 2022. The Company recorded lower net income after taxes mainly due to lower revenues in a market with reduced housing demand and a slightly reduced gross margins due to the increased market competition. Additionally, there was an increase in operating expenses due to the one-time non-recurring costs related to the LCF transaction as well as increases related to non-cash items and some additional increases to bolster human resources and systems for the Company to successfully handle the increased acquisitive growth.
  • Non-IFRS measure normalized EBITDA margin decreased to 20% for the year ended December 31, 2023 from 25% for the year ended December 31, 2022. This decrease was mainly due to decreased gross margins and increased operating costs. $630,547 in one-time, non-recurring acquisition costs have been added back to normalized EBITDA, but additional support costs, such and bolstering human resources and upgrading internal systems to support the acquisitive growth of the Company, were not added back as these will be ongoing costs moving forward.

SELECTED FINANCIAL RESULTS

Year Ended

Dec 2023

Dec 2022

Revenue

$49,413,675

$61,899,620

Cost of Sales

35,854,858

42,053,514

Gross Profit

13,558,817

19,846,106

Gross Margin %

27 %

32 %

Operating Expenses

8,294,053

7,316,437

Operating Income

5,264,764

12,529,669

Net Income After Adjustments and Taxes

3,149,838

8,830,337

Adjusted EBITDA

9,298,310

15,725,608

Adjusted EBITDA Margin %

19 %

25 %

Normalized EBITDA

9,928,857

15,725,608

Normalized EBITDA Margin %

20 %

25 %

Weighted Average Number of Shares

58,101,219

58,702,361

Adjusted EBITDA per Share ($ per share)

0.16

0.27

Income per Share, Basic ($ per share)

0.05

0.15

Income per Share, Fully Diluted ($ per share)

0.05

0.14




Selected Financial Information as at:


Dec 2023

Dec 2022

Total Assets

$79,443,699

$50,491,344

Total Non-Current Liabilities

37,089,753

14,757,079

Outlook for 2024:

The Company is continuing to operate in a more competitive market during the first part of 2024 and anticipates this will continue until either the market adjusts to current interest rates or there is a decrease in interest rates.  The Company still anticipates that increased interest rates will have a minimal overall effect on the long-term housing market due to the  number of homes that are needed to support Canada's continued population growth and the number of homes required to restore housing affordability by 2030. The Company is prepared to continue managing pricing by balancing revenues with gross margins and explore new markets in order to continue to drive organic growth as much as possible during fiscal 2024. Since the beginning of 2024, the Company has seen a steady increase in quote activity and incoming orders on a weekly basis.

In late 2023, the Company began developing a larger salesforce across Canada to drive sales through market expansion into areas the Company hasn't generally supplied to, through product expansion with wall panels and floor cassettes, and through future expansion expected from organic growth, automation, M&A, and green builds.

"Moving forward, we anticipate taking further steps towards automation to better position AEP as the supplier of choice for contractors and developers for the additional 2 million homes needed by 2031, on top of the 1.9 million homes expected to be built in that timeframe" said Hadi Abassi. "The Company has spent a lot of time preparing for the future and we are excited to build our Company to take advantage of the need for the construction growth over the coming years."

The recent acquisition of LCF is a great addition to the AEP group of companies. Future acquisitions remains a key part of AEP's long term strategic growth plans. The Company has built a strong pipeline of M&A opportunities and will continue to assess more M&A opportunities that fit within the Company's goals and strategies. We will also continue to work on bringing in the latest technology and automation to improve operational efficiencies, as well as adding new products and services to better serve our customers.

Non-GAAP / Non-IFRS Financial Measures

Certain financial measures in this news release do not have any standardized meaning under IFRS and, therefore are considered non-IFRS or non-GAAP measures. These non-IFRS measures are used by management to facilitate the analysis and comparison of period-to-period operating results for AEP and to assess whether AEP's operations are generating sufficient operating cash flow to fund working capital needs and to fund capital expenditures. As these non-IFRS measures do not have any standardized meaning under IFRS, these measures may not be comparable to similar measures presented by other issuers. The non-IFRS measures used in this news release may include "EBITDA", "EBITDA margin", "adjusted EBITDA", "adjusted EBITDA margin", "normalized EBITDA" and "normalized EBITDA margin". For a description of the composition of these measures, please refer to AEP's Management's Discussion and Analysis for the year ended December 31, 2023 under "Non-IFRS / Non-GAAP Financial Measures", available on AEP's website at www.atlasengineeredproducts.com or on SEDAR at www.sedar.com.

About Atlas Engineered Products Ltd.

AEP is a growth company that is acquiring and operating profitable, well-established operations in Canada's truss and engineered products industry. We have a well-defined and disciplined acquisition and operating growth strategy enabling us to scale aggressively and apply new technologies, giving us a unique opportunity to consolidate a fragmented industry of independent operators.

Company contact details:
Hadi Abassi, CEO & President, Founder
Atlas Engineered Products Ltd.
Email: info@atlasep.ca
250-754-1400
PO Box 37036 Country Club PO
Nanaimo, BC V9T 6N4
www.atlasengineeredproducts.com

FORWARD LOOKING INFORMATION

Information set forth in this news release contains forward-looking statements. These statements reflect management's current estimates, beliefs, intentions and expectations; they are not guarantees of future performance. Although AEP believes that the expectations reflected in the forward looking statements are reasonable, there is no assurance that such expectations will prove to be correct, or that such future events will occur in the disclosed time frames or at all.  AEP cautions that all forward looking statements are inherently uncertain and that actual performance may be affected by a number of material factors, many of which are beyond AEP's control.  Such factors include, among other things: Risks and uncertainties relating to AEP, including those to be described in the Management's Discussion and Analysis ("MD&A") for AEP's year ended December 31, 2023.  Accordingly, actual and future events, conditions and results may differ materially from the estimates, beliefs, intentions and expectations expressed or implied in the forward-looking information. Except as required under applicable securities legislation, AEP undertakes no obligation to publicly update or revise forward-looking information.

SELECTED FINANCIAL INFORMATION

Except as noted below, the financial information provided in this news release is derived from the AEP's audited financial statements for the year ended December 31, 2023 and the related notes thereto as prepared in accordance with International Financial Reporting Standards ("IFRS") and related IFRS Interpretations Committee ("IFRICs") as issued by the International Accounting Standards Board ("IASB").  A copy of AEP's financial statements for the year ended December 31, 2023  and the related Management's Discussion and Analysis is available on AEP's website at www.atlasengineeredproducts.com or on SEDAR at www.sedar.com.

Financial information for AEP's acquisitions are included in AEP's unaudited financial statements from the date of acquisition. Financial information for acquired businesses for periods prior to the date of acquisition were prepared by management and have not been reviewed or audited by independent auditors.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

SOURCE Atlas Engineered Products Ltd.

Cision View original content: http://www.newswire.ca/en/releases/archive/April2024/26/c8218.html

Contact:

Jake Bouma, Representative for AEP, Phone: 1-604-317-3936, Email: jake.bouma@atlasaep.ca

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