Terra Nostra Announces Third Quarter Financial Results
Tuesday April 22, 8:08 am ET
Revenues More Than Double to $108.8 Million
LOS ANGELES & ZIBO, China--(BUSINESS WIRE)--Terra Nostra Resources Corporation (OTCBB: TNRO - News), a majority owner of two joint venture companies in the copper and stainless steel industries in China, announced results for the three months ended February 29, 2008.
Revenues for the third fiscal quarter ended February 29, 2008 were $108.8 million, compared to $41.3 million for the three month period ended February 28, 2007. Gross profit reached $11.4 million in the quarter ended February 29, 2008 compared to a loss of $1.3 million in the third quarter ended February 28, 2007. Blended gross profit margin in the quarter was 10.4%, reflecting strong management of raw materials sourcing in both of the copper and stainless steel operations, higher copper pricing, and the addition of higher grade stainless steel.
Operating profit for the three months ended February 29, 2008 was $7.9 million as compared to operating loss of $4.6 million in the period ending February 28, 2007. Comprehensive income for the third quarter ended February 29, 2008 was $39.3 million compared to comprehensive loss for the third quarter ended February 28, 2007 of $3.3 million. Included in fiscal third quarter 2008 comprehensive income was non-cash derivative income of $37.6 million related to the company’s convertible note financings.
On a weighted average share basis, net income in the third quarter was $0.61 per share compared to a net loss of $0.08 per share in last year’s third quarter. On a fully diluted per share basis, net income in the third quarter was $0.45 per share compared to a net loss of $0.08 per share in last year’s third quarter.
“Third quarter’s performance reflects the aggressive ramp in our stainless steel business, with production increasing to 22,260 MT from 1,495 MT last year,” said Don Nicholson, president and acting CFO of Terra Nostra.
“We made good progress executing on our growth strategy to become a premier producer of specialty stainless steel and cathode copper in China,” continued Nicholson. “Refurbishment of the Jinpeng copper facility, designed to bring the plant to international environmental standards, is now complete. On the stainless steel side we produced our initial run of higher value 310-S and increased value-added downstream production of approximately 17,000 MT of hot-rolled strip.”
Nicholson continued, “In the fourth quarter we will continue to deploy the capital raised in the second half of 2007, increasing production and diversifying our product mix. Now that both the Jinpeng and Dongying copper facilities are fully operational, we will begin to ramp downstream production of rod and wire used in the power and home appliance sectors. Based on orders in hand we are planning for a continued ramp in stainless steel production, including a larger portion of higher grade 310-S and hot rolled strip.
“Domestic demand remains robust. Our local sources of supply and our modern, efficient and strategically located plants give us a distinct advantage over imports and other in-country producers. Our performance to date demonstrates that we’ve built an efficient manufacturing model to maximize profitability as we achieve greater economies of scale and optimize capacity utilization,” concluded Nicholson.
Nine Month Results
Revenues for the nine months ended February 29, 2008 were $409.1 million, compared to $153.2 million for the nine months ended February 28, 2007. Gross profit for the period was $38.1 million, compared to $4.7 million for the nine months last year. Blended gross margin was 9.3%, driven by lower raw material costs in both stainless and copper operations and an increase in higher value grades of stainless steel, as compared to 3.0% a year ago. Operating profit for the nine months ended February 29, 2008 was $19.5 million, compared to an operating loss of $3.1 million in the nine months ended February 28, 2007.
For the nine months ended February 29, 2008, comprehensive loss was $2.7 million compared to comprehensive loss for the nine months ended February 28, 2007 of $6.4 million. On a fully diluted per share basis, net loss in the nine months was $0.09 per share compared to a fully diluted net loss of $0.15 per share.
Convertible Financing Accounting Treatment
In accordance with Generally Accepted Account Principles (GAAP), non-cash derivative income relates to the company’s derivative financial instruments that are initially and subsequently carried at fair market values. The market price of the company’s common stock significantly affects the fair value of the derivative financial instruments. Lower stock prices during the period had the effect of significantly decreasing the fair value of the company’s derivative liabilities and, accordingly, the company was required to adjust the derivatives to these lower values with a gain to its income. Further detailed discussion of accounting policies for derivative financial instruments can be found in the company’s most recent 10Q.
Conference Call
Management will conduct a conference call at 9:00 a.m. Eastern today. During the call, management will discuss the company’s quarterly performance and financial results. To participate in the live call by telephone, please dial 877.447.4724 or, for international callers, please dial (1)706.634.5119, and reference ID number 44231630. Those interested in listening to the conference call live via the Internet may do so by visiting the company’s web site at www.tnr-corp.com/ and entering the Investor Center for the link. Please go to the web site 15 minutes prior to the scheduled start to register, download and install any necessary audio software.
