News Centre

FOR: NORANDA INCOME FUND

Noranda Income Fund Reports Second Quarter Earnings Before Income Taxes of $11.9 Million

Jul 23, 2012 - 17:36 ET

SALABERRY-DE-VALLEYFIELD, QUÉBEC--(Marketwire - July 23, 2012) - Noranda Income Fund (the "Fund") (TSX:NIF.UN) reported strong second quarter earnings before income taxes, supported by the continued high zinc premiums and sulphuric acid netbacks.

Q2 2012 and Subsequent Highlights:

  • Earnings before income taxes of $11.9 million (up 15% from Q2 2011 - $10.4 million)
    • Zinc premiums at 7.4 cents US per pound (Q2 2011 - 5.9 cents US per pound)
    • Acid netback of US$69 per tonne (Q2 2011 - US$78 per tonne)
  • Declared monthly cash distributions of $0.04167 per priority unit consistently for the months of April to July 2012
  • Scheduled debt repayment of $7.5 million was made on June 28, 2012
  • Debt as at June 30, 2012 totalled $91.1 million (net of deferred financing fees), down from $94.2 million at the end of December 2011
  • On July 3rd Ms. Eva Carissimi was appointed President and Chief Executive Officer of the Manager
Conference Call and Webcast:
July 24th at 10:30 a.m. EST
Dial in number: 416-340-8530
Toll-free North American number: 1-877-240-9772
In addition, you can listen to the teleconference and view the slide presentation from the Noranda Income Fund website: http://www.norandaincomefund.com/investor/conference.html or click on this link: http://events.digitalmedia.telus.com/noranda/072412/index.php
Recording of the Conference Call:
Dial in number: 905-694-9451 or
Toll-free North American number: 1-800-408-3053.
The pass code is 8488 956# and you will be prompted for your name and company.
The recording will be available until midnight on August 7, 2012.

Financial and Operating Highlights (Second quarter 2012 compared to second quarter 2011)

Earnings before income taxes were $11.9 million in the second quarter of 2012, compared to $10.4 million in the same quarter a year ago. The $1.5 million increase was mainly due to higher zinc sales volumes and zinc premiums, and lower finance costs, partially offset by lower by-product revenues.

Cash provided by operating activities in the second quarter of 2012, before net changes in non-cash working capital items and cash distributions, was $18.4 million compared to $21.4 million during the same period of 2011. During the second quarter of 2012, non-cash working capital decreased by $7.0 million due to a decrease in inventories, partially offset by an increase in accounts receivable and a decrease in accounts payable and accrued liabilities. During the second quarter of 2011, non-cash working capital increased by $6.8 million due to an increase in accounts receivable and the impact of the change in the fair value of the embedded derivative related to the zinc concentrate payable.

Financial and Operating Highlights (First half 2012 compared to first half 2011)

Earnings before income taxes were $27.5 million in the first half of 2012, compared to $27.1 million in the same period a year ago. The $0.4 million increase was mainly due to higher zinc premiums, sulphuric acid netbacks and sulphuric acid sales, and lower finance costs, partially offset by lower zinc sales volumes and lower copper sales and prices.

Cash provided by operating activities in the first half of 2012, before net changes in non-cash working capital items and cash distributions, was $41.5 million compared to $34.6 million during the same period of 2011. During the first half of 2012, non-cash working capital increased by $17.0 million due to a decrease in income taxes payable and accrued liabilities, partially offset by a decrease in inventories and accounts receivable. During the first half of 2011, non-cash working capital decreased by $23.8 million due to a decrease in accounts receivable, an increase in accounts payable and accrued liabilities and income taxes payable and the impact of the change in the fair value of the embedded derivative related to the zinc concentrate payable.

A full version of the second quarter 2012 Management's Discussion and Analysis ("MD&A") and the Unaudited Interim Financial Statements will be posted on the Fund's website, http://www.norandaincomefund.com/investor/financials.html today, July 23, 2012 and they will be available on www.sedar.com on July 24, 2012. Readers should be advised that the summarized communication presented in this press release is limited in its disclosure. It is not a suitable source of information for readers who are unfamiliar with the Fund, and it is not in any way a substitute for reading the Unaudited Interim Financial Statements and MD&A because a reader relying on this summary alone might overlook decision critical information.

Noranda Income Fund is an income trust whose units trade on the Toronto Stock Exchange under the symbol "NIF.UN". The Noranda Income Fund owns the electrolytic zinc processing facility and ancillary assets (the "CEZinc processing facility") located in Salaberry-de-Valleyfield, Québec. The CEZinc processing facility is the second-largest zinc processing facility in North America and the largest zinc processing facility in eastern North America, where the majority of zinc customers are located. It produces refined zinc metal and various by-products from zinc concentrates purchased from mining operations. The CEZinc processing facility is operated and managed by Canadian Electrolytic Zinc Limited.

Except where otherwise indicated, all amounts in this press release are expressed in Canadian dollars.

Further information about the Noranda Income Fund can be found at www.norandaincomefund.com.

SELECTED FINANCIAL AND OPERATING INFORMATION
Second Quarter Year-to-date
($ thousands) 2012 2011 2012 2011
Statements of Comprehensive Income Information
Revenues 152,586 164,630 298,342 345,602
Raw material purchase costs 72,755 94,056 151,234 193,981
Revenues less raw material purchase costs 79,831 70,574 147,108 151,621
Other expenses:
Production 47,536 43,193 87,654 89,347
Selling and administration 5,735 5,182 11,019 10,811
Foreign currency loss (gain) 2,067 (1,290 ) 428 (3,707 )
Loss (gain) on derivative financial instruments 228 (769 ) (685 ) 681
Depreciation of property, plant and equipment 8,913 8,516 16,535 17,349
Rehabiliation recovery 1,307 660 488 209
Earnings before finance costs and income taxes 14,045 15,082 31,669 36,931
Finance costs, net 2,098 4,694 4,145 9,861
Earnings before income taxes 11,947 10,388 27,524 27,070
Current and deferred income tax expense 4,617 4,087 10,048 9,803
Earnings attributable to Unitholders and Non-controlling interest 7,330 6,301 17,476 17,267
Distributions to Unitholders 4,687 - 9,375 -
Current income tax recovery on distribution (1,367 ) - (2,734 ) -
Increase in net assets attributable to Unitholders and Non-controlling interest 4,010 6,301 10,835 17,267
Other comprehensive income (loss) (1,173 ) 220 (1,756 ) (184 )
Comprehensive income 2,837 6,521 9,079 17,083
Statements of Financial Position Information June 30, 2012 Dec. 31, 2011
Cash and cash equivalents 2,390 1,497
Inventories 59,629 61,017
Accounts receivable 89,991 92,803
Property, plant and equipment 271,028 277,135
Total assets 433,278 447,389
Accounts payable and accrued liabilities 52,492 60,795
Total bank and other loans 91,079 94,216
Total liabilities excluding net assets attributable to unitholders 220,055 243,245
Second Quarter Year-to-date
Statements of Cash Flows Information 2012 2011 2012 2011
Cash provided by operating activities before cash distributions and net change in non-cash working capital items 18,437 21,358 41,489 34,627
Cash distributions (4,687 ) - (9,375 ) -
Net change in non-cash working capital items 6,953 (6,753 ) (17,041 ) 23,756
Cash provided by operating activities 20,703 14,605 15,073 58,383
Cash used in investing activities (5,752 ) (7,216 ) (10,403 ) (11,514 )
Cash used in financing activities (14,319 ) (12,656 ) (3,777 ) (48,373 )
Net increase in cash and cash equivalents 632 (5,267 ) 893 (1,504 )
Cash distributions declared per Priority Unit 0.12501 - 0.25002 -
Second Quarter Year-To-Date
Key Performance Drivers 2012 2011 2012 2011
Zinc concentrate processed (tonnes) 119,847 130,338 251,988 258,383
Zinc grade (%) 54.9 54.1 54.2 54.1
Zinc recovery (%) 96.8 97.1 96.6 96.7
Zinc metal production (tonnes) 65,521 67,906 128,334 131,859
Zinc metal sales (tonnes) 69,664 67,567 131,937 136,940
Processing fee (cents/pound) 39.2 38.9 39.2 38.9
Zinc metal premium (US$/pound) 0.074 0.059 0.074 0.060
By-product revenues ($ millions) 9.7 14.4 22.1 27.5
Copper in cake production (tonnes) 415 575 1,152 1,433
Copper in cake sales (tonnes) 487 1,022 1,234 1,903
Sulphuric acid production (tonnes) 98,420 107,486 208,706 214,223
Sulphuric acid sales (tonnes) 107,262 107,355 217,595 212,967
Average LME copper price (US$/pound) 3.57 4.15 3.67 4.27
Sulphuric acid netback (US$/tonne) 69 78 72 69
Average LME zinc price (US$/pound) 0.87 1.02 0.90 1.06
Average US/Cdn. exchange rate 1.01 0.97 1.01 0.98
* 1 tonne = 2,204.62 pounds

Adjusted Earnings before Distributions to Unitholders, Finance Costs, Income Taxes, Depreciation and Amortization ("Adjusted EBITDA")

Adjusted EBITDA is used by the Fund as an indication of cash generated from operations. Adjusted EBITDA is not a recognized measure under IFRS and therefore the Fund's method of calculating Adjusted EBITDA is unlikely to be comparable to methods used by other entities.

The Fund's Adjusted EBITDA is calculated by starting with earnings before finance costs and income taxes and adjusting for all of the non-cash items such as depreciation, rehabilitation expense, net change in employee benefits, changes in fair value of embedded derivatives and non-cash gains/(losses) on derivative financial instruments. A reconciliation of earnings before finance costs and income taxes to Adjusted EBITDA for the second quarter and first half of 2012 compared to the same periods of 2011 is provided below:

Adjusted EBITDA Q2/2012 Q2/2011 Change
($ thousands)
Earnings before finance costs and income taxes $ 14,045 $ 15,082 $ (1,037 )
Depreciation of property, plant and equipment 8,913 8,516 397
Net change in rehabiliation liability 1,319 545 774
Gain on derivative financial instruments (1,491 ) (1,866 ) 375
Change in fair value of embedded derivatives 1,145 6,050 (4,905 )
Loss on sale of assets 90 (328 ) 418
Net change in employee benefits (640 ) (319 ) (321 )
$ 23,381 $ 27,680 $ (4,299 )
Adjusted EBITDA 1H/2012 1H/2011 Change
($ thousands)
Earnings before finance costs and income taxes $ 31,669 $ 36,931 $ (5,262 )
Depreciation of property, plant and equipment 16,535 17,349 (814 )
Net change in rehabiliation liability 302 93 209
Gain on derivative financial instruments (1,127 ) (363 ) (764 )
Change in fair value of embedded derivatives 4,861 (3,939 ) 8,800
Loss on sale of assets 308 398 (90 )
Net change in employee benefits (988 ) (638 ) (350 )
$ 51,560 $ 49,831 $ 1,729


FOR FURTHER INFORMATION PLEASE CONTACT:

Financial information: Canadian Electrolytic Zinc Limited,
Noranda Income Fund's Manager
Michael Boone, Vice President & Chief Financial Officer
416 775-1561
info@norandaincomefund.com
www.norandaincomefund.com



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