Timminco Reports Continued Improvement for Q3 results

ONTARIO, Nov. 09, 2010 - Timminco Limited ("Timminco" or the "Company")today reported its financial results for the third quarter ended September 30, 2010.
"Our silicon metal operations ran at full capacity for the third straight quarter, the result of continued strong demand from our traditional chemicals and aluminum industry customers," said Dr. Heinz Schimmelbusch, Chairman of the Board and Chief Executive Officer of Timminco. "As a result, we achieved year-over-year growth in revenue of 94% and positive EBITDA for our silicon metal product line. Moreover, the US$40.3 million in proceeds from our production partnership transaction with Dow Corning completed subsequent to quarter end allowed us to fully repay our existing bank debt and provides a significantly stronger financial position from which to build on our recent success."
Dr. Schimmelbusch added: "We continue to work toward developing new customer markets for our solar grade silicon product line and, to that end, shipped several metric tons of trial chunks and bricks to potential customers."
Financial Results
The consolidated financial statements of the Company have been prepared on a going concern basis, which contemplates the Company having sufficient liquidity to realize its assets and to discharge its liabilities in the normal course of business for the foreseeable future. The Company's ability to continue as a going concern is subject to achieving a level of sustained profitability and positive cash generation and to the renewal or replacement of its revolving credit facility with Bank of America, without which the Company may be unable to continue to realize its assets and discharge its liabilities in the normal course of business.
The Company's financial results for the third quarter ended September 30, 2010 consist of its silicon metal and solar grade silicon operations. The results from the third quarter ended September 30, 2009 also include a 22-day contribution from the Magnesium Group, which was divested on July 22, 2009.
Sales for the third quarter of 2010 ("Q3-10") increased 94% to $36.9 million from $19.1 million for the third quarter of 2009 ("Q3-09"), which included $2.0 million in sales from the Magnesium Group. The increase is the result of higher sales from the Company's core silicon metal product lines.
EBITDA for Q3-10 was negative $26.8 million, compared to negative $7.7 million in Q3-09. The loss was primarily the result of net realizable value provisions of $25.0 million relating to solar grade silicon inventories, a $1.9 million provision with respect to solar equipment supplier claims and transaction costs of $1.8 million relating to the Dow Corning transaction, as well as the strength of the Canadian dollar versus the Euro and U.S. dollar and expenditures related to solar grade silicon product specification improvements. Excluding the net realizable value provisions, supplier claim provision and the Dow Corning transaction costs, normalized EBITDA for Q3-10 was $2.0 million. This performance reflects improved productivity at our Becancour facility relative to the temporary shut down which occurred in 2009.
Net loss for Q3-10 was $34.2 million, or $0.17 per share, compared with a net loss of $18.5 million, or $0.15 per share, for Q3-09. The increase is primarily attributable to the solar grade silicon inventory net realizable value provisions of $25.0 million, a $1.9 million provision with respect to solar equipment supplier claims and Dow Corning transaction costs of $1.8 million, as well as the strength of the Canadian dollar versus the Euro and U.S. dollar and expenditures related to solar grade silicon specification improvements.
Cash, cash equivalents and short-term investments at September 30, 2010 were $4.5 million compared with $5.3 million at September 30, 2009. Subsequent to quarter end, the Company received $41.2 million (US$40.3 million) of cash on closing of the production partnership transaction with Dow Corning and immediately repaid in full the outstanding amount of US$27.7 million on its credit facility with Bank of America.
On September 30, 2010, the Company and Bank of America agreed to extend the term of the existing credit facility to November 30, 2010, to facilitate on-going negotiations regarding a new multi-year revolving credit facility for the Company. Also on September 30, 2010, the Company and Investissement Quebec agreed, subject to the Company's renewal of its revolving loan facility by December 1, 2010, on an amendment to the $25 million term loan that extends the repayment of that loan from August 2011 to a series of payments over the period August 2012 to August 2019. The Company is in discussions with lenders regarding a new revolving credit facility, but there is no assurance that any new facility will be completed before the foregoing deadlines on terms that are satisfactory to the Company, if at all.
Silicon Group
Silicon Group sales for Q3-10 increased by 117% to $36.9 million from $17.1 million for Q3-09. Q3-10 sales were composed substantially of silicon metal product lines and reflected shipments of 34,787 metric tons (mt) compared with 23,695 mt in Q3-09. Silicon metal product line sales increased 121% to $36.7 million from $16.6 million in Q3-09. The increase in silicon metal sales is due to improved demand for silicon metal from the Company's traditional chemical and aluminium industry customers. The strength of the Canadian dollar against the U.S. dollar and the Euro had an unfavourable impact on Q3-10 sales of $2.8 million and $0.9 million, respectively, compared with Q3-09, as the majority of Silicon Group sales are denominated in these currencies.
Solar grade silicon sales for Q3-10 were $0.2 million compared with $0.4 million for Q2-09 and reflected shipments of 5 mt of trial chunks and bricks to potential customers. The Company continues to pursue its market development and research and development efforts to meet prospective customer specifications for solar grade silicon, which during Q3-10 resulted in costs of approximately $0.8 million.
Gross profit for Q3-10 was negative $21.6 million (58.5% of sales) compared with negative $5.4 million (31.9% of sales) for Q3-09. Gross margin for Q3-10 was impacted by the solar grade silicon inventory net realizable value provisions of $25.0 million. Excluding the solar grade silicon inventory net realizable value provisions, normalized gross profit for Q3-10 was $3.4 million compared with negative $5.4 million in Q3-09. The increase in normalized gross profit is primarily the result of lower production costs per metric ton reflecting better furnace efficiency and lower labour costs, as well as higher selling prices.
EBITDA for Q3-10 was negative $24.0 million, including the net realizable value provisions related to solar grade silicon inventory of $25.0 million and solar equipment supplier claims of $1.9 million, compared with negative $9.9 million for Q3-09. Excluding the solar grade silicon inventory net realizable value provisions and solar equipment supplier claims provisions, normalized EBITDA for Q3-10 was positive $2.9 million compared with negative $9.9 million for Q3-09. The increase in normalized EBITDA is primarily the result of operating at historical production levels in Q3-10 relative to the temporary shut down of production for part of Q3-09.
Net loss for Q3-10 was $27.5 million, including the solar grade silicon inventory net realizable value provisions of $25.0 million and solar equipment supplier claims of $1.9 million, compared with a net loss of $13.5 million for Q3-09. Excluding the solar grade silicon inventory net realizable value provisions and solar equipment supplier claims, normalized net loss was $0.5 million. The decrease in normalized net loss is a result of operating at historical production levels in Q3-10 relative to the temporary shut down of production for part of Q3-09.