Tornado Global Hydrovacs Reports Third Quarter 2019 Results

CALGARY, Alberta, Nov. 18, 2019 (GLOBE NEWSWIRE) — Tornado Global Hydrovacs Ltd. (“Tornado” or the “Company”) (TGH: TSX-V) today reported its unaudited condensed consolidated financial results for the Three and Nine Month periods ended September 30, 2019. The unaudited condensed consolidated financial statements and MD&A have been filed on SEDAR and can be reviewed at and on the Company’s web site
Financial and Operating Highlights (in CAD $000’s except per share data)1 Earnings (loss) before interest, tax, depreciation, amortization and stock-based compensation (EBITDAS) and Earnings (loss) before interest and tax (EBIT) are not defined by IFRS. The definition of EBITDAS does not consider gains and losses on the disposal of assets, fair value changes in foreign currency forward contracts and non-cash components of stock-based compensation. While not an IFRS measure, EBITDAS is used by management, creditors, analysts, investors and other financial stakeholders to assess the Group’s performance and management from a financial and operational perspective.
Three months ended September 30, 2019 and Recent DevelopmentsRevenue of $16,237 increased by $4,837 compared to $11,400 in Q3/2018. The increase in revenue was due to the continued improvement in the hydrovac market equipment purchase demand from the municipal sector in both Canada and the United States (“US”).
Gross profit of $2,854 increased by $735 compared to $2,119 in the same period of 2018 due to the increased revenue. The overall margin however was negatively impacted by lower margins on outsourced production to third parties to meet growing demand, offset by cost savings recognized on parts sourced from China through the company’s China operations.
EBITDAS of $1,168, (comprising North America – $1,622, China – negative $321 and Corporate – negative $133), increased by $621 compared to $547 in Q3/2018, due to increased revenues and gross profit in North America and reduced compensation expense in China. For the North American Operations, EBITDAS during Q3/2019 continued the improvement experienced in Q2/2019.
Net income of $500 increased by $438 compared to net income of $62 in Q3/2018. This is due to the factors discussed above, offset by income tax expense of $183.
During Q3/2019 additional shipments of hydrovac truck parts, sourced by Tornado China, were sent to Canada for the production of hydrovac trucks.Segmented information (in CAD $000’s)Outlook
The Company’s production and sales of hydrovac trucks is expected to continue at or exceed the current level for the remainder of 2019 and into 2020 for the following reasons:

— Continued spending on infrastructure by both the Canadian and the US governments is anticipated to support the market demand of hydrovac trucks in North America.
— The Company introduced a newly designed hydrovac truck in 2018 which management believes has compelling advantages over hydrovac trucks currently offered in the market, including having a lighter weight and more debris capacity making it easier to comply with the road weight laws of the US and Canada.
— In 2018, the Company entered into an exclusive sales agreement with a US strategic partner who has an integrated network of 23 locations across North America. The Company expects sales in the US to continue at or exceed the current level for the remainder of 2019 and into 2020.
— In the fourth quarter of 2019, the Stettler facility’s production capacity is expected to be fully used to produce hydrovac trucks for sale in North America. The Company is expected to also continue using sub-contractors to produce additional trucks to meet the increase in demand.   

Through its presence in China, the Company has established a strategic supply chain from China for certain parts. This has had a positive impact by reducing the Company’s production costs in North America and this benefit is expected to continue to positively impact the financial results for the remainder of 2019.The Company’s newly designed skid mounted unit was introduced to the North American market at trade shows in Toronto and Indianapolis in Q1/2019. The skid mounted units received positive feedback from prospective customers. The skid mounted units will be produced in China which management anticipates will allow the Company to offer competitively priced skid mounted units for both the North American and Chinese markets.The Company expects that the weak Canadian dollar will continue to positively impact profit margins because a significant number of the Company’s hydrovac trucks are sold in US dollars while manufactured in Canada.The Company has refocused its business in China resulting in a significantly reduced cost structure for its China Operations. With a fleet of 4 distinct types of hydrovac units in China, the Company will concentrate, over the short term, on developing its business in China through unit rentals and educating the Chinese market through live demonstrations, of the benefits of hydrovac truck capabilities. The Company’s China office is being used to negotiate and source certain high quality, low cost hydrovac truck parts for North American truck production. The Company anticipates that the steps it has taken to refocus its business opportunities in China and the resulting reduction in cost structure will continue to positively impact the Company’s 2019 financial results.The Company is facing sales demand greater than its manufacturing capability. The Company is assessing strategic options available to address forecasted production constraints and inefficiencies.About Tornado Global Hydrovacs Ltd.The Company designs and manufactures hydrovac trucks in Canada and sells hydrovac trucks for excavation service providers to the municipal markets and oil and gas industry in Canada and the USA. Hydrovac trucks use high pressure water to pulverize soil and turn it into mud, and then vacuum up the resulting mud into its tank. Tornado currently operates in North America. In China, the Company’s subsidiary is used principally to source certain parts to the Company’s North America operations.For more information about Tornado Global Hydrovacs Ltd., visit or contact:Advisory
Neither the Exchange nor its Regulation Service Provider (as that term is defined in policies of the Exchange) accepts responsibility for the adequacy or accuracy of this news release.Certain statements contained in this news release constitute forward-looking statements. These statements relate to future events. All statements other than statements of historical fact are forward-looking statements. The use of the words ‘‘may”, “expects”, “expected”, “expectations”, “believes”, “anticipates”, “planned” and other words of a similar nature are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Although the Company believes these statements to be reasonable, no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. Such statements include statements with respect to: (i) the expected increase in the Company’s production and sales of hydrovac trucks in North America in 2019 and into 2020 due to the expected increase in spending on infrastructure projects by the governments in Canada and the US; (ii) the expectation of the continued positive effect the agreement with the US strategic customer relationship has had on sales in the US and the expectation of increase production of hydrovac trucks in Canada; (iii) the anticipated production of the new skid mounted units in China will allow the Company to sell the same at competitive prices; (iv)  the expectation that the weak Canadian dollar will positively impact profit margins; (v) the anticipated benefit of reduction of the costs with respect to the China Operations and (vi) the expected reduction in the Company’s production costs in North America due to the Company establishing a strategic supply chain from China for certain parts. Actual results could differ materially from those anticipated in these forward-looking statements as a result of prevailing economic conditions, receipt of requisite regulatory approvals, and other factors, many of which are beyond the control of the Company. The forward-looking statements contained in this news release represent the Company’s expectations as of the date hereof, and are subject to change after such date. The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as may be required by applicable securities regulations.

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