Atlas Engineered Products scales up its business to meet construction demand from western Canada

Atlas Engineered Products scales up its business to meet construction demand from western Canada

Specializes in the manufacture and supply of roof trusses and wood products and is consolidating the industry in North America Positioned for growth with expanding footprint in burgeoning industry Addressable Canadian market of C$2.5 billion for trusses, joists, engineered beams, prefabricated walls and floors What Atlas Engineered Products does: Atlas Engineered Products Ltd (CVE:AEP) (OTCMKTS:APEUF) is a growth company, which specializes in the manufacture and supply of roof trusses and wood products and is consolidating the industry in North America. For the uninitiated, trusses are pre-fabricated, triangular frameworks that support the roof of a house. The addressable market in Canada for trusses, joists and engineered beams is said to be $1 billion, while it is $2.5 billion for those products, together with prefabricated walls and floors. Atlas acquires profitable and well-established firms in the sector, and since listing in November 2017 with just one manufacturing plant of its own, has bought a number of other companies. The acquisitive opportunity is large because many are ageing firms, whose owners are looking to monetize their considerable investment. The company aims to strengthen the finances of these smaller firms and protect the interest of the owners while providing career growth to loyal employees.. How is it doing: It was back to the future for Atlas Engineered Products in its last announcement, with the firm revealing on February 3, 2021, the return of founder Hadi Abassi as its CEO and president. Abassi previously acted as the company’s CEO from November 8, 2017 to November 5, 2018 when he transitioned to the role of executive vice president. His appointment followed the resignation of former CEO and president Dirk Maritz, who also stepped down from the company’s board of directors. Abassi established Atlas Engineered Products Ltd in 1999 to manufacture roof trusses at its Nanaimo manufacturing facility to service customers on Vancouver Island and established Coastal Windows in 2003 as a dealer and then subsequently a manufacturer of customer doors and windows.  Atlas noted that it has grown significantly in the past several years through the acquisition of established operations across Canada and now has seven facilities in three provinces.  It has expanded its product offerings and continues to grow its innovative line of products and services in all regions and said it is well poised to expand its geographical footprint through additional acquisitions and to continue to grow its revenues from all locations. In January 2021, Atlas announced an agreement with ZyTech Building Systems LP to acquire the bulk of ZyTech’s manufacturing assets from its former Langley location in the Lower Mainland of British Columbia. The company said the purchase price for the equipment of $958,160 was below replacement or market value. It paid ZyTech a deposit of $100,000 on execution of the agreement. Atlas said ZyTech’s equipment will be installed at the group’s Novum and Atlas Building Systems locations in the first quarter of 2021, ready for the peak building season. In addition to acquiring the equipment, the company said it would also be “completing several supply contracts” for ZyTech’s clients. The company’s last set of results, announced in November 2020, saw Atlas increasing revenues and posting a profit in its third quarter. It reported revenue of C$9,677,692 for the three months ended September 30, 2020, compared to C$7,900,805 for the three months ended June 30, 2020. Atlas said its profitability had continued to improve during 2020. It posted an operating profit of C$482,818 in 3Q, compared to a profit of C$248,675 in 2Q and a loss of C$866,084 in the 1Q.  In addition, the company said it earned net income of C$419,589 in 3Q and C$220,601 in Q2, versus a loss of C$762,961 in 1Q.  It said the expansion through 3Q represented a quarterly growth in revenue of 22%. The quarter-over-quarter increase in total revenues was driven by resilient markets in British Columbia and Manitoba, paired with an Ontario market rebound after coronavirus (COVID-19) related permitting restrictions had been lifted at the end of May 2020. On the financing front, in December 2020, Atlas said it had signed a new credit and banking agreement with TD Canada Trust. The new credit facilities included a C$2.0 million uncommitted revolving line of credit, a C$4.8 million reducing term loan, a C$5.5 million committed revolving line of credit, and a C$2.0 million non-revolving equipment leasing line.  Inflection points: Strategy news from newly-returned CEO Full-year 2020 results Ongoing expansion moves What the boss says: In January’s statement announcing the purchase of assets from ZyTech, Atlas Engineered interim CFO Melissa MacRae said: “Along with our new banking and financing deal that was previously announced, this equipment acquisition positions us to start 2021 with a significant next step in our organic growth plan.” She added: “In the high-growth BC market, it is a priority to drive our organic growth initiatives because it is inexpensive and value-adding. With our focus on efficiencies, productivity, economies-of-scale, and buying power optimization, we are confident we can deliver on our growth and profitability targets.” Contact the author at jon.hopkins@proactiveinvestors.com

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