Atlas Engineered Products Reports 14% Revenue Growth and a Solid Cash Position in Q1 2020 Financial and Operating Results

Atlas Engineered Products (“AEP” or the “Company”) is pleased to announce its financial and operating results for the first quarter ended March 31, 2020. All amounts are presented in Canadian dollars.

Financial Highlights for Q1 2020:

– Overall revenue for the three months ended March 31, 2020 was $7,097,979 compared to revenue of $6,216,908 for the three months ended March 31, 2019. This represents overall growth in revenue of 14% in comparison to the three months ended March 31, 2019. This increase in total revenues was driven by the organic growth of AEP’s existing operations and the first full quarter with the Company’s South Central Building Systems location in Carman, Manitoba.

– Gross margins for the three months ended March 31, 2020 was 16%, which was down from a gross margin of 19% for the three months ended March 31, 2019. Gross margins declined in Quarter 1 2020 due to lumber price volatility at the beginning of 2020. The decrease was mainly associated with the prices of lumber rising sharply in anticipation of the 2020 summer and fall building season, as shown in the graph below. The largest of these increases occurred in January and February, when most winter work being completed had already been quoted and ordered in 2019, at lower lumber prices. As lumber prices increased, inventories were purchased at higher pricing in the beginning of 2020 to meet demand. Lumber prices fell sharply from mid-February 2020 as the COVID-19 pandemic hit North America. AEP’s vendor managed inventory had to be depleted at the higher values during a time where the market was scrambling to get volumes at competitive prices.

– The Company’s cash balance has increased to $3,244,684 as at March 31, 2020 from $83,005 (net of bank indebtedness) as at December 31, 2019. This is due to the private placement completed in February of 2020 and has put the Company in a significantly positive cash position moving forward with targeted 2020 acquisition and product expansion activities.

2020 Integration, Optimization, and Expansion Strategy

– AEP continues to work incredibly hard to optimize workflows, productivity, and capitalize on economies of scale such as a new national engineered wood product supply arrangement. This new arrangement is expected to result in cost savings, guaranteed lead times, and improved delivery of products to our locations.

– In June 2020, the Company announced its expansion into pre-fabricated wall panels in British Columbia. This product expansion will assist the Company in its growth and product diversification.

– Significant cost saving and cash preservation strategies were implemented near the end of Quarter 1 2020. This has supported the Company’s ability to handle the impacts of the COVID-19 pandemic and move forward with 2020 activities such as product expansion, targeted acquisitions, and improved workflows and automation.

Dirk Maritz, President and CEO of AEP stated, “Despite the challenges and effects posed by COVID-19, AEP remains in a solid financial position. AEP has strong liquidity and entered 2020 with an improved financial position over the previous year. We continue to grow our orderbook despite the unprecedented times. I am incredibly proud of my team’s ability to respond quickly, significantly reduce costs from March onwards, return AEP to positive EBITDA margins and protect our cash reserves while increasing productivity and efficiency under physical distancing mandates. The AEP team counteracted the sudden lumber price free-fall as well as the incurred costs in Q4 2019 and Q1 2020 in anticipation of our acquisition plans for 2020. We have successfully eliminated the costs and we are optimistic about our targeted acquisitions for 2020. Upwards. Onwards.”

In closing, the Company believes revenues for Quarter 2 2020 will show further improvement over Quarter 1 2020, and a return to strong, positive normalized EBITDA margins for Quarter 2 2020.

For the full first quarter results, click here.

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, giving us a unique opportunity to consolidate a fragmented industry of independent operators.

Source: Atlas Engineered Products Ltd.