Magnifoam Reports Financial Results For Q2 Fiscal December 2004 Reporting Period

Business Wire, Nov 11, 2004

MISSISSAUGA, Ontario -- Groendyk acquisition helps boost sales growth for period

Magnifoam Technology International Inc. (TSX:MTI) today reported financial results for the three months and year to date ended September 30, 2004.

Q2 Highlights

- Total sales increased 23% to $12.6 million, with sales increases in three of four divisions

- Reported net income of $82 thousand or nil cents per share

- Completed acquisition of MTI Groendyk during the period

"The second quarter of fiscal December 2004 - a shortened nine-month fiscal period to accommodate our change to a calendar year end of December 31 - was highly successful for MTI," said Bill Neill, MTI President and CEO. "Despite the seasonal slowdown in our Aerospace division, we reported strong sales growth in three of four divisions and continued to diversify our customer base through the strategic acquisition of MTI Groendyk. This acquisition, completed in August 2004, dramatically increases our distribution network and sales opportunities in our North American Silicone operations. In addition, management is extremely pleased by the increase in year-over-year profit before taxes, which improved by $572,000 for the period. This is despite a foreign exchange loss in 2004, compared to a foreign exchange gain in 2003, that resulted in a negative $200,000 swing for the period. These results include $200,000 in unbudgeted costs to support our program to improve lean manufacturing techniques in the period. Taken together, these factors represent a positive change of almost $1 million year-over-year."

Financial Results

Sales for the three months ended September 30, 2004 increased $2,363,000 or 23% to $12,578,000, from $10,215,000 in the second quarter of fiscal March 2004. The Groendyk acquisition accounted for sales of $1,409,000 or 13.8 percentage points of this increase, representing sales from August 30, the date of the acquisition, to September 30, 2004.

Aerospace sales for the second quarter rose $802,000 or 17% to $5,524,000, from $4,722,000 for the same period last year, reflecting increased sales to MTI's key Aerospace customers, Embraer and Bombardier. The impact of the lower U.S. dollar was mitigated by forward U.S. dollar contracts during the period.

Total Silicone sales increased $1,637,000 or 42% to $5,521,000, compared to $3,884,000 last year. This includes Groendyk sales, which accounted for 36 percentage points of this increase during the period. European Silicone sales from Leewood rose $174,000 or 9.1% to $2,094,000. Leewood sales in Euros were up 6.8% with the higher Euro accounting for an additional $40,000 of the increase. North American Silicone sales include MDI and MTI Groendyk. MDI's sales of $2,018,000 were $54,000 or 2.8% higher than last year's sales of $1,964,000. However the lower U.S. dollar reduced reported sales by $110,000.

Sales in U.S. dollars increased 8.5% in the quarter, primarily due to growth in the Gore product line. Sales were lower than anticipated in transit seating, due to a temporary suspension of deliveries to a major customer. Deliveries to this customer resumed during the current quarter.

Fabricated Product sales declined $78,000 or 4.8% to $1,532,000, compared to $1,610,000 for the same period last year, due to lower automotive business. Other customer categories remained stable during the period.

On a percentage basis, Aerospace sales accounted for 44% of total sales for the second quarter, compared to 46% for the same period last year. Silicone sales were virtually even to Aerospace at 44% of total sales, compared to 38% last year. Fabricated Products sales represented 12% of sales, compared to 16% last year.

Sales for the six months ended September 30, 2004 increased $3,996,000 or 18.7% to $25,358,000, compared to sales of $21,362,000 for the same period last year. Excluding the acquisition of Groendyk, sales increased $2,587,000 or 12.1% for the period. This includes a net decrease in sales of $350,000 due to the lower U.S. dollar, partially offset by the higher Euro.

Total operating expenses for the second quarter of $4,001,000 were $350,000 higher than expenses for the three months ended September 30, 2003 of $3,651,000. This was partially due to plant and laboratory expenses being $211,000 higher than last year. Major factors include variable costs associated with increased business activity, increased engineering and other costs related to new programs, and the new Groendyk operation. Administration costs include approximately $200,000 towards the Company's production efficiency project, which will begin to yield meaningful benefits in the third quarter. These savings should be seen primarily in improved gross margins. Administrative expenses also included $16,000 for the stock options issued in the quarter.

Total operating expenses for the six months ended September 30, 2004 were $7,917,000, an increase of $819,000 or 12% over the same period last year. Administration costs include $300,000 towards the Company's ongoing production efficiency project, which advanced during the period.