ZCL Composites (TSX:$ZCL) released its third quarter financial results- here is everything you need to know.
While initial responses reflected disappointment, investors remain confident for ZCL’s forthcoming future such that the market for tank replacements and new construction by retail fuel marketers will return to growth in 2018. During the third quarter of 2017, due in part to a deferral in spending by certain larger customers and the impact of a strengthening Canadian dollar, revenues declined $5.5 million, compared with a year earlier.
Gross profit and gross margins were impacted in the quarter by a number of factors. Some of such include a decrease in revenue over a relatively fixed cost base, additional expenditures with regard to investments made in both manufacturing processes and sales and marketing initiatives, disruptions caused by hurricanes and flooding in the US Gulf Coast, and costs relating to the decision to exit the industrial markets.
Net income declined $2.4 million due to the after-tax impact of the factors noted above, but also due to the non-cash impairment of assets charge of $1.0 million before taxes, associated with a decision to cease offering products to industrial markets, including above-ground chemical storage tanks used in Oil Sands applications.
Yet, ZCL remains confident in its ability to achieve a 10% compound annual revenue growth objective over the longer term. Specifically, the company’s outlook for the North American Fuel Markets remains positive. Over the long term, the industry consolidation of retail fuel marketers is expected to be positive for ZCL as they are the only supplier that can economically serve these larger customers across North America from its broad manufacturing footprint.
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