Carmanah Reports Second Quarter 2012 Results

VICTORIA, British Columbia--(BUSINESS WIRE)--Carmanah Technologies Corporation (TSX: CMH) (“the Company” or “Carmanah”) today reported its second quarter results for the period ended June 30, 2012.

For the three months ended June 30, 2012, the Company recorded a net loss of $1.5 million on revenues of $6.1 million. Total second quarter 2012 revenues were down $4.6 million over the same period in 2011. The net loss is primarily driven by lower revenues in the first half of 2012.

“The quarter demonstrated marginal improvement versus prior quarter,” stated Bruce Cousins, Chief Executive Officer. “However, we remain disappointed with performance levels overall. The Grid Tie business has developed a backlog as a result of the Ontario FIT program changes having recently been announced, however given project cycle times for completion, this was not converted to revenues in the quarter. In addition, demand continues to be soft in several other verticals, with a notable absence of any large projects closed during the quarter. Our pipeline remains meaningful and our emphasis is on closing transactions.”

Financial Condition at June 30, 2012 compared to December 31, 2011

    Cash and cash equivalents of $3.1 million, down $1.8 million from $4.9 million
    Working capital of $5.6 million, down $2.2 million from $7.8 million
    Continued debt-free operations

Second quarter 2012 compared to second quarter 2011

    Revenues: $6.1 million, down $4.6 million from $10.7 million
    Gross margin: 29.1%, down from 30.6%
    Operating costs: $3.2 million, approximately even
    Net loss: $(1.5) million net loss, up $1.3 million from a net loss of $(0.2) million
    Adjusted EBITDA (a non-IFRS measure): negative $1.1 million, down $1.7 million from positive $0.6 million

Summary of operations

    Revenues for the second quarter of 2012 were $6.1 million, down $4.6 million from $10.7 million in the second quarter of 2011. By product sector, revenues are as follows:
        Signals, $2.9 million, down from $4.5 million
        Outdoor Lighting, $0.9 million, down from $1.2 million
        Grid-tie, $0.6 million, down from $3.7 million
        Mobile, $1.7 million, up from $1.3 million
    Gross margin percentages for the second quarter of 2012 were 29.1%, down from 30.6% in quarter 2 2011. The decrease was primarily driven by (1) some price discounting in our Outdoor Lighting segment in an effort to break into new markets, and (2) price adjustments in our Marine segment in response to competitive activity. Broken down by product sector, gross margin percentages are as follows:
        Signals, 36.3% down from 39.5%
        Outdoor Lighting, 18.0% down from 27.2%
        Grid-tie, 11.5% down from 20.9%
        Mobile, 29.3% down from 30.9%.

Our operational & business highlights year to date in 2012 include the following items.

    Negotiated and signed two long term exclusive cooperation agreements to enhance our portfolio and strengthen our network of strategic partnerships with the following companies:
        Sabik Oy (“Sabik”), our marine signalling partner based in Finland which we have worked with over the past few years. The five year agreement expands on our previous two year sales and marketing collaborations to include a deeper integration of joint product development.
        Laser Guidance Inc., a US based pioneer in aviation precision guidance systems. The agreement provides us with a five year exclusive world-wide marketing license for a portfolio of Laser Guidance aviation navigation aids.

    Strengthened our distribution channel through the addition of new partners in key markets including Best Light in Mexico and Al-Babtain in Saudi Arabia for our Outdoor Lighting market.
    Embarked on major development efforts for our signalling products which will see a variety of new products launched this year, most significantly a new state of the art Marine signal lantern to replace our 700 series lights and a new Traffic signalling device, the rectangular rapid flashing beacon (“RRFB”) that improves crosswalk safety.
    Negotiated a number of major sales contracts, including 3 grid-tie projects worth $2.4 million. We also signed a $10 million non-binding letter of agreement with one of our South American distributors to procure, commission and install various aids to navigation on a major South America waterway. This agreement is subject to finalization of certain conditions with the end customer and we expect this should be completed in the near term.
    Expanded our focus on revenue growth with the hiring of an additional five sales employees to complement our new vertical orientated sales structure. Under this new structure, each market vertical has its own leadership and supporting team and is directly responsible for driving the planning, development and execution within the market.
    Initiated a non-brokered private placement to raise up to CDN$4 million in cash to fortify our treasury.

Reporting Currency and Accounting Standards

Unless otherwise indicated, all financial information presented in this press release is in US dollars and has been prepared in accordance with International Financial Reporting Standards (“IFRS”).

Adjusted EBITDA