NOVIK ANNOUNCES RECORD QUARTERLY SALES

THIRD QUARTER 2010 HIGHLIGHTS

• Net earnings of $693,000 compared to $93,000 last year
• Consecutive record quarterly sales at $7.8 M
• 61% increase in sales during the quarter
• 66% sales growth for the first nine months
• 446% improvement in adjusted EBITDA for the first nine months
• Quarterly operating profit of $1,043,000 compared to $128,000 last year

QUEBEC CITY, Nov. 10 /CNW Telbec/ - Novik inc. (NVK) releases today its results for the third quarter of fiscal year 2010. All amounts are expressed in Canadian dollars unless otherwise indicated.

NOVIK inc.
for the periods ended September 30, 2010 and 2009					Third	Third	Year to	Year to
(in thousands dollars, except for amounts per share)					quarter	quarter	date	date
					2010	2009	2010	2009
					$	$	$	$
Operating results
Revenues					7,839	4,872	19,384	11,688
Gross margin					3,257	1,993	7,387	4,493
Earnings before depreciation, stock-based compensation, financial expenses and income taxes					1,637	442	2,687	492
Net earnings (loss)					693	93	432	(99)
Basic and diluted net earnings (loss) per share					0.014	0.002	0.009	(0.002)
NOVIK inc.
					Sept. 30,	Dec. 31,
(in thousands dollars, except for amounts per share)					2010	2009
					$	$
Financial position
Total assets					26,287	25,314
Working capital					962	1,457
Total long-term financial liabilities					9,519	10,450
Total liabilities					14,921	14,496
Shareholder's equity					11,366	10,818
Shareholder's equity per share					0.23	0.22
Number of shares outstanding					48,470,858	48,470,858

Mr. Gaudreau, Novik's president, is proud to announce positive financial results for the third quarter of current fiscal year. He points out that "during the previous quarter, Novik had announced a record quarter in its sales with disappointing profitability. The high cost of raw materials combined with introductory discounts offered to large North American distributors explained this lower profitability. The current quarter presents better financial results. Novik has again set a new sales record but with much greater operational profitability. The increase in the price of our products, a decrease in the price of raw materials on the market, the significant decrease in introductory discounts offered, as well as tighter monitoring of our operating costs contributed to these more positive financial results."

Revenue

During the course of the third quarter of fiscal year 2010, Novik recorded revenues of $7.8 M, compared to $4.9 M during the same quarter of the previous fiscal year. This level is a new quarterly sales record for Novik, surpassing the quarterly sales record of $7.7 M during the previous quarter. Novik has thus achieved two consecutive quarters of record sales. Mr. Gaudreau explains that "Novik's 61% sales growth in the third quarter compared to the same period of last fiscal year is still a great achievement, given our presence in an industry still facing significant challenges following the latest economic recession. Our industry has grown marginally since last year and remains far from the thresholds seen in the mid-2000s; Novik is thus gaining market share, given its greater pace of sales growth since the start of the current year."

Mr. Gaudreau adds that "the sales growth remains mainly in Canada and the United States. Just like the previous quarters of the current fiscal year, the presence of new large distributors in these two countries and especially the introduction of innovative covering products in 2009 explain this growth. Sales increased by nearly $3 M in the North American territory for the third quarter, a 76% increase compared to the same period of the previous year. The same surge in sales growth was observed on this market during the previous quarter. The efforts in marketing and developing new products in recent years have allowed Novik to generate this sales growth and stand out in a market where the opportunities are at a slow pace. This phenomenal growth in Novik's sales in a North American economic context considered very difficult, positions the company advantageously in the face of a stronger economic recovery foreseen over the coming years."

On the other hand, Mr. Gaudreau ends by outlining that "European deliveries are constant compared to the last quarter. Access to credit for our distributors remains the main obstacle to bringing back the sales volumes seen in 2008, of nearly $9 M. It is difficult for us to predict the volume of sales for the coming year, but we know that Novik products still remain a viable, desired option on this continent. We are thus continuing discussions with our current distributors in order to maximize the opportunities offered on this continent."

Novik's cumulative sales, for the first nine months of 2010, total $19.4 M compared to $11.7 M for the same period of the previous year. This strong 66% increase in sales is also explained by the items mentioned above.

EARNINGS BEFORE INTEREST, STOCK-BASED COMPENSATION COSTS, TAXES, DEPRECIATION AND AMORTIZATION ("adjusted EBITDA")

Earnings before interest, stock-based compensation costs, taxes, depreciation, and amortization (adjusted EBITDA) is a measure that has no standardized meaning prescribed by Canadian generally accepted accounting principles. It is therefore considered to be a non-GAAP measure in Canada. Accordingly, the measure may not be comparable to similar measures presented by other issuers. This measure is presented and described in this management report in order to provide shareholders and potential investors with additional information regarding the company's liquidity and ability to generate funds to finance its activities.

For the third quarter of fiscal year 2010, adjusted EBITDA is $1,637,000 compared to $442,000 for the same period of the previous fiscal year.

Novik's large sales growth during the third quarter explains this increase.  This level of adjusted EBITDA, with a ratio of 21% on sales, represents a threshold more comparable to that seen in fiscal year 2008, when Novik had generated an annual return of 20%.  This ratio demonstrates Novik's potential to generate attractive levels of liquidities in a context of profitability.

For the nine-month period ended on September 30, 2010, adjusted EBITDA totals $2,687,000 compared to $492,000 for the same period of the previous fiscal year. It is important for Novik to post a suitable adjusted EBITDA threshold during the second and third quarters, given that the next two quarters will be periods of lower sales combined with the production of Novik products in order to respond to strong sales during second quarter next year.

NET PROFIT

The company's net profit for the third quarter of fiscal year 2010 amounts to $693,000, compared to a net profit of $93,000 for the same quarter of the previous fiscal year. It is important to understand that the net profit generated during the second quarter of the previous fiscal year was made possible through the recording of an exchange gain of $300,000 as explained above. Considering the level of earnings coming from operations, Novik shows an operating profit of $1,128,000 in the current third quarter compared to an operating profit of $27,000. Novik's large sales growth in this third quarter made this significant improvement possible.

In addition, the net profit for the third quarter improved greatly compared to the previous quarter. The net profit for the previous quarter was $51,000.  Despite a comparable level of sales, this profitability was improved thanks to the increase in the gross margin as a percentage of sales and better monitoring of selling expenses.

For the nine-month period ended on September 30, 2010, the net profit is $432,000 compared to a net loss of $99,000 for the same period of the previous fiscal year. Novik generated an operating profit of $1,187,000 after the first nine months of 2010 compared to an operating loss of $956,000 last year. A marked increase can thus been seen in the company's profitability in only one year.

OUTLOOK

Achieving profitability in 2010 remains an important focus for Management by the end of the fiscal year. Despite a more difficult fiscal year in 2009, Management insisted on, and still insists, on action plans in order to encourage this return to profitability. The level of orders and current discussions with customers encourages us to maintain focus in order to achieve this profitability goal.

We are also preparing the goals for next fiscal year. Having already received the support of most of our large North American distributors for 2011, we are building the foundation of our marketing strategy with regard to Novik's various markets and products. We have already put forward certain projects to improve our products and our range of colours, bringing a strong positive view from of our distributors.  We are thus working internally to ensure that these opportunities are ready for the first quarter of fiscal year 2011. We are also aiming to continue our organizational agility in our manufacturing operations in order to be ready to adequately support the growth foreseen for the coming years.

About NOVIK

Novik (NVK) is a leader in the design, manufacturer and distribution of innovative polymer exterior siding, roofing coverings and accessories that replace traditional materials such as stone, brick or wood shingles. These products target the world-wide residential and commercial construction industry.

Forward-looking statements contained in this press release involve  known and unknown risks, uncertainties or other factors that may cause actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

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For further information:

Source :   

Novik inc.

For further information:

Michel Gaudreau
President
Tel. : [phone]
E-mail : [email protected]

Pascal Bouthot
Vice-President, Finances
Tel. : [phone]
E-mail : [email protected]