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CEMATRIX Corporation Announces Second Quarter Financial Results

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CEMATRIX Corporation Announces Second Quarter Financial Results

CEMATRIX Corporation Announces Second Quarter Financial Results

CALGARY, ALBERTA--(Marketwired - Aug 3, 2017) - CEMATRIX Corporation (TSX:CVX) (the "Corporation" or the "Company" or "CEMATRIX") announces the release of its consolidated financial results for the three and six months ended June 30, 2017.

Mid-Year Review

"The future of CEMATRIX continues to look extremely positive, as infrastructure markets continue to grow and there are signs that planned construction activity is increasing in the oil and gas sector. Infrastructure market sales growth and new sales from the Lafarge/CEMATRIX arrangement are taking longer than anticipated but CEMATRIX is making progress, as reflected in the continued growth in its sales pipeline," stated Jeff Kendrick, President and CEO of CEMATRIX.

The results for the first six months of 2017 are lower than expected because three projects, that were delayed from 2016 and scheduled to be completed in the first six months of 2017, have been delayed further in whole, or in part by, due to contractor onsite project delays. The total uncompleted contracted sales value of these delayed projects is approximately $2.4 million. One of the projects commenced again in July, another is now scheduled for August and the third, with a sales value of $0.8 million, may not go until the late fall, if not later.

Management knew coming into 2017 that oil and gas sales would be down substantially from those reported in 2016 due to the completion of a couple of large projects in Alberta in 2016 and the affect that low commodity prices would have on any new projects in this sector, but did not think that it would be as slow as has been experienced. Even so, management had expected that growth in additional infrastructure sales and sales to be generated by its new partnership with the largest cement supplier in the world would more than offset this decline. Unfortunately, both the growth in infrastructure markets and the sales benefit of the joint agreements with Lafarge Canada are taking longer than anticipated to develop.

Contracted sales are $9.1 million as compared to $11.3 million at the same time last year. The current sales pipeline is $108 million compared to $80 million at this time last year. The sales pipeline is comprised of projects on which CEMATRIX has been asked to submit a design or quote, or both.

Sales for the six months ended June 30, 2017 were $4,735,701, down $1,190,060, or 20.1%, in comparison to the same period in 2016. Although volumes are up slightly the average selling price has declined due the shift in sales to lower priced infrastructure work from the higher priced oil and gas projects. Infrastructure sales were up $1,603,918, or 52.5% due mainly to a couple of large tunnel grouting jobs that carried over from 2016. The increase in infrastructure sales was not sufficient to offset the decline in oil and gas sales of $2,793,978, or 97.4%, but it would have been if the delayed projects had gone ahead as scheduled prior to the end of the quarter. During the first six months of 2016 the Company benefitted from two large projects in the Alberta oil and gas sector.

As a result of the lower sales, the gross margins earned during the period decreased by $540,969, or 44.2%. The gross margin percentage in 2017 of 14.4% was down from the 20.6% in 2016. This decline is generally due to the shift to infrastructure work in 2017, which has lower margins than oil and gas projects, and the impact of a change in production method for a specific project from dry mix to wet mix which has a higher material cost. This production method change was implemented for the benefit of the introduction of the new Lafarge/CEMATRIX regional expansion program.

The decrease in the gross margin was partially offset by lower operating expenses such that the loss before income taxes for the six months ended June 30, 2017 was $414,814 compared to a loss of $125,758 in the same period in 2016.

Financial Results

Selected financial information for the three and six months ended June 30, 2017 and 2016 is as follows:

Three months ended June 30 Six months ended June 30
2017 2016 Change 2017 2016 Change
Revenue $ 2,208,230 $ 2,755,072 $ (546,842 ) $ 4,735,701 $ 5,925,761 $ (1,190,060 )
Gross margin $ 147,169 $ 492,677 $ (345,508 ) $ 681,854 $ 1,222,823 $ (540,969 )
Operating expenses (508,474 ) (607,516 ) 99,042 (1,032,150 ) (1,205,049 ) 172,899
Operating income (loss) (361,305 ) (114,839 ) (246,466 ) (350,296 ) 17,774 (368,070 )
Non-cash stock based compensation 49,502 (39,241 ) 88,743 21,093 (63,320 ) 84,413
Finance costs (53,906 ) (46,893 ) (7,013 ) (104,427 ) (119,289 )
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