COMPANY WATCH

June 2013 Filtration Industry Analyst11

ProSep Inc, Canada

Key Figures (C$ thousand)First quarter ended 31.3

2013 2012

Revenues 8823.8 8270.1

Cost of Sales 5692.7 5647.1

Gross Profit 3131.1 2623.0

R&D Expenses 124.4 221.4

Operating Income/(Loss) (921.5) (2501.0)

Net Profit/(Loss) (1424.1) (1435.1)

COMMENTCanada’s ProSep has recorded first quarter revenues for fiscal 2013 of C$8.8 million, up 6.7% from the C$8.3 million recognized in the equivalent quarter of last year.

The company’s US operations grew 63.2% year-on-year to reach C$6.8 million, with the strong growth offsetting a 57.8% decline in its Asia Pacific markets where revenues fell to C$1.6 million.

ProSep’s gross profit for the quarter rose 19.4% to C$3.1 million, with the accompanying margin increasing to 35.5% from 31.7% on the back of higher contribution from proprietary technologies.

The company’s EBITDA improved to negative C$0.6 million compared with a loss of C$2.2 million in the equivalent period of 2012, reflecting the higher gross margin and tighter cost control.

ProSep’s loss for the quarter amounted to C$1.4 million, equivalent to the corresponding period of 2012. Loss on foreign exchange offset improvements in gross margin during the quarter.

The loss took the company’s accumulated deficit to C$107 million at the end of the quarter, while it also had a negative equity of C$2.3 million and a negative working capital of C$3.0 million. ProSep acknowledged the position cast significant doubt about its ability to continue as a going concern,

but said it was continuing with a series of cost reduction initiatives and was actively working with stakeholders to improve its working capital.

Following the quarter’s end, the company concluded the sale of its 51% investment in ProSep Kolon for C$5 million and a net cash inflow of approximately C$4 million. In addition, the company reimbursed a related C$1.1 million debenture, related interests and also reimbursed C$0.9 million of its senior overdraft facility.

At quarter end, ProSep’s backlog stood at C$13.7 million compared to C$18.6 million at the start of the year. During the period, the company concluded C$2.2 million in new contracts and has closed close to C$7.0 million subsequently. The company reports that most of the contracts signed since the start of the year are for produced water treatment systems for both onshore and offshore installations. Recent orders have included a C$3.5 million contract for the supply of such a system to an onshore natural gas processing plant in southern Asia, a C$2.0 million order for a US-based onshore facility and a C$1.3 million contract for a system to be installed on a floating production storage and offloading vessel that will operate in the Gulf of Mexico. ■www.prosep.com

SPX Corp, USA

Key Figures (US$ million)First quarter ended

30.3.2013 31.3.2012

Revenues 1133.7 1153.5Of Which:Flow Technology 613.0 628.1

Cost of Products Sold 832.5 853.6

Gross Profit 301.2 299.9

Segment Income 82.4 83.0Of Which:Flow Technology 55.0 46.4

Operating Profit 22.6 17.3

Income (Continuing Operations) before Tax 6.8 21.4

Net Income 3.6 12.8

COMMENTSPX has posted first quarter revenues for fiscal 2013 of US$1.13 billion, down 1.7% on a year ago. Organic revenues were flat, while acquisitions increased revenues by 0.3% and currency fluctuations decreased them by 2.0%.

In the company’s Flow Technology segment revenues for the quarter were US$613.0 million, a decrease of 2.4% on the prior year. Organic sales decreased 1.7%, while acquisitions and currency fluctuations decreased revenues by 0.7%. Increased supply of components was offset by lower systems-based revenues, with SPX reporting that the year-ago quarter benefited from two large projects that were substantially completed in 2012.

SPX’s segment income edged down on the year earlier from US$83.0 million to US$82.4 million. In the Flow Technology division, segment income was US$55.0 million, equivalent to 9.0% of revenues, compared to the year earlier’s US$46.4 million (7.4% of revenues). The increase in income and margin was attributed to improved execution in the company’s European and US operations.

“Our first quarter performance was largely comparable with the prior year, but lower than we anticipated,” Christopher Kearney, SPX’s chair, president and CEO, said. “While the performance across most of SPX was fundamentally in line with our expectations, we were disproportionally impacted in a few discrete areas, particularly in our Thermal Segment.”

Kearney added that the company was taking actions to address the areas of poor performance identified in the quarter, including the acceleration of restructuring plans to address its cost structure in some of its European operations.

Looking forward, Kearney expects 2013 to be a testing year with SPX forecasting that revenues will be down 2% to 3% on the US$5.10 billion posted in fiscal 2012, although segment income margins are predicted to expand between 40 and 80 basis points.

Kearney added that capital allocation plans for the year included US$200 million of share repurchases and a US$250 million voluntary pension contribution, with the latter already completed. ■www.spx.com