Atlas Engineered Products Reports Second Quarter 2023 Financial and Operating Results

Atlas Engineered Products (“AEP” or the “Company”) (TSX-V: AEP; OTC Markets: APEUF) is pleased to announce its financial and operating results for the three and six months ended June 30, 2023. All amounts are presented in Canadian dollars.

“I continue to be proud of the AEP team that produced another solid quarter, with relatively stable margins in spite of reduced material prices, continued interest rate hikes causing downward momentum in the construction sector, and a overall more competitive market,” said Hadi Abassi, the Company’s CEO, President and Founder. “We continue to work hard to ensure the Company is moving forward with organic and acquisitive growth. We continue to believe that there is an ongoing need for more housing in Canada and we strive to be the partner of choice for contractors and homeowners during their construction projects.”

Financial Highlights for Q2 2023:

• Revenue for the three months ended June 30, 2023 was $11,217,336 compared to revenue of $16,836,329 for the three months ended June 30, 2022. Revenues decreased due to some material prices (ie: lumber) that are passed along to to customers stabilizing at significantly lower prices than the prior two years. The market has also seen a slowdown in some areas across Canada, mainly Ontario. This has mainly been due to rising interest rates resulting in the construction industry pausing to assess affects on new housing demand, which has led to reduced housing starts. The Company expects this slowdown to be short-term in nature and that markets will strengthen as they adjust to current market conditions and increased demand due to significant population growth and the ongoing housing deficit.
• Gross margin for the three months ended June 30, 2023 was 30%, up from 28% for the three months ended June 30, 2022. Gross margin increased due to continued pricing assessments and the Company’s focus on improving efficiencies across all product lines. Additionally, due to the continued labour shortage, the Company has focused on efficient, higher margin work where necessary to fill the shops at some locations based on the available labour.
• Operating expenses increased by $439,186 for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. 39% of this increase is due to non-cash items of depreciation and amortization and share based payments. The remaining increase is mainly related to one time, non-recurring cash outlay expenses incurred in relation to the acquisition of Léon Chouinard et Fils Co. Ltd./Ltée. (“LCF”) announced on August 23rd, 2023. The anticipated acquisition of LCF led the Company to bolster human resources and systems to ensure the Company was ready and able to handle the resulting growth and geographical expansion.
• Net income was $786,236 for the three months ended June 30, 2023 compared to net income of $2,044,118 for the three months ended June 30, 2022. The Company recorded a lower net income after taxes in the current period mainly due to decreased revenues and increased operating expenses.
• Non-IFRS measure adjusted EBITDA decreased to $2,051,169 and $3,791,143 for the three and six months ended June 30, 2023 from $3,665,814 and $6,623,260 respectively for the three and six months ended June 30, 2022 as shown below. These decreases were mainly due to decreased sales and increased operating costs. Some acquisition costs have been added back to normalized EBITDA, but additional support costs for the Company’s growth were not added back as these will be ongoing costs moving forward.

Subsequent Event to Q2 2023:

On August 23, 2023, the Company acquired LCF located in New Brunswick, Canada. LCF is a manufacturer of roof trusses, floor systems, and wall panels and a supplier of engineered wood products. The acquisition of LCF aligns with the Company’s strategic acquisition plan and expands the Company’s geographical reach while also significantly growing AEP’s wall panel manufacturing expertise and capacity.

Outlook for 2023:

The Company is continuing to operate in a more competitive market during 2023 as interest rates have risen in an effort to slow inflation. The Company currently anticipates that increased interest rates will have a minimal overall affect on the housing market after the initial impact of the increase is absorbed by the market. The number of homes that are needed to support Canada’s continued population growth and immigration continues to be significant. The Company will continue to monitor the effects of interest rates on the housing market, and is prepared to manage pricing and explore new markets in order to continue to drive organic growth as much as possible during fiscal 2023.

Reduced raw material costs, such as lumber, continue to impact the Company’s revenues. These costs are passed along directly to the customer and will result in decreased sales prices to the customer as input costs decrease. Average lumber prices have decreased by roughly 57% for the three months ended June 30, 2023 compared to the three months ended June 30, 2022.

The Company’s large order announced on March 9, 2023 was delayed in Quarter 1. A small part of this order was delivered in June of 2023, with the majority expected to be delivered in Quarter 3 and 4, 2023. Permit and construction delays have caused postponements in these deliveries that were outside the Company’s control.

The recent acquisition of LCF is a great addition to the AEP group and acquisitions remains a key part of AEP’s long term strategic goals. 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, while also working to bring in the latest automation to improve operational efficiencies, and adding new products and services to better serve our customers.

For the complete press release, 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 and apply new technologies, giving us a unique opportunity to consolidate a fragmented industry of independent operators.

Contact:

Jake Bouma – Representative for AEP – (604) 317-3936 – jake.bouma@atlasaep.ca

Source: Atlas Engineered Products Ltd.