In Q1, revenue and EBITDA were down 25% and 65%, respectively, compared to the same period last year. Combined divisional net margin dropped 59% to CAD16 million, with the Western Division accounting for 69% of the decline. The steep decline in lead and crude oil prices compared to last year caused two-thirds of the drop in EBITDA. After a very slow start to the quarter, the rest of the business realized a revenue drop of 14% and an EBITDA decline of 24%, said Al Cadotte, Newalta’s president and chief executive officer.

Recent indications are positive as commodity prices are rising, our markets are strengthening, and our onsite and heavy oil/SAGD services are continuing to grow. We have also reduced our cost base and improved the profitability of our operations. Our business has the capacity to generate strong cashflow and excellent return on capital.”

We are at the early stages of a program to restructure and reposition our business which began with the conversion to a corporation and with organizational changes as well as significant reductions to our cost base. We are now focused on driving strong bottom-line performance and reducing our debt to reestablish benchmarks of performance and to position the business for sustained profitable growth. Success will drive strong investor returns and provide the financial resources to continue to build our company.

Financial results and highlights for the three months ended March 31, 2009:

EBITDA decreased CAD22.1 million, or 65%, to CAD12.0 million compared to Q1 2008. Excluding the change in commodity prices, revenue, net earnings, and EBITDA in Q1 2009 were down from Q1 2008 by 14%, 51%, and 24%, respectively.

Western’s revenue and net margin declined by 30% and 55% year-over-year, respectively, due primarily to the decline in crude and natural gas prices, which dropped 49% and 38%, respectively, and the subsequent impact on North American drilling activity.

Eastern’s performance in Q1 declined with revenue and net margin down 17% and 74%, respectively, due to the 58% decline in lead pricing and the weak Ontario economy.

SG&A costs decreased, compared to last year by CAD1.2 million to CAD13.6 million. Q1 2009 SG&A also included non-recurring costs associated with severance and organizational realignment.

Maintenance capital expenditures for the quarter were CAD2.0 million compared to CAD1.2 million in 2008. Growth capital expenditures were CAD6.0 million compared to CAD16.7 million.

Other highlights:

The company amended the terms of its credit facility with its Canadian lending syndicate. The primary change to the credit facility is an increase of the funded debt to EBITDA covenant from 3:00:1 to 3:50:1 for the remainder of 2009. In addition, at the election of Newalta, the principal amount of the credit facility was reduced from CAD425 million to CAD375 million, leaving unused capacity of about CAD66 million. The maturity date remains October 12, 2010.

Capital expenditures for 2009 have been reduced to CAD40 million, comprised of CAD25 million for growth capital and CAD15 million for maintenance capital. The company continues to expect first half combined capital spending to be CAD15 million.

As the company continues to be successful in securing new onsite project work across Canada, including heavy oil/SAGD, it expects that a portion of the CAD25 million in growth capital expenditures will be used to fund these projects in the second half of the year.

Prudent management of the company’s balance sheet resulted in a reduction in working capital to CAD32.4 million, an improvement of CAD68.0 million as compared to March 31, 2008 and an improvement of CAD7.6 million as compared to December 31, 2008.

At the end of Q1 2009, senior long-term debt decreased CAD4.3 million to CAD259.0 million, as compared to December 31, 2008. Excess cash will be used to pay down debt.

Management realigned the business with market conditions and reduced the growth capital forecast and, as a result, 250 positions have been eliminated. As well, effective April 1, Newalta suspended its matching contributions to the Employee Profit Sharing Plan. These actions are in addition to salary and hiring freezes and tight controls on discretionary expenditures initiated in late 2008.

Newalta’s board of directors declared a dividend of CAD0.05 per share to holders of record as at March 31, 2009 which was paid April 15, 2009.

Outlook:

In Q2 2008, revenue was CAD142.9 million and EBITDA was CAD26.6 million. Since the start of 2009, commodity prices have steadily increased. The company anticipates the improved performance experienced late in Q1 across the company’s business lines to continue in Q2. Aggressive pursuit of onsite projects, projects in the Heavy Oil business unit and Stoney Creek Landfill volumes are also anticipated to contribute to Q2 performance. Commissioning the second kiln at Ville Ste. Catherine will continue through Q2 and is anticipated to be completed early in the second half of the year.

The actions that the company has taken have rationalized its cost structure in line with current market conditions and growth investments. These initiatives will positively impact results in Q2 2009. The Q1 2009 savings from the cost containment program were mostly offset by the additional reorganization costs, but the company expects to realize the full cost reduction benefit from these initiatives for the remainder of the year. Commencing in Q2, year over year cost savings are estimated to be about CAD8 million per quarter. Gains in managing working capital should also be maintained for the remainder of 2009. With commodity price levels and market activity at current levels, Q2 will demonstrate the continued improvement in performance the company began to experience at the end of Q1. The company enters Q2 with improved financial flexibility, a strengthened competitive position. The company is poised to capitalize on opportunities as the economy recovers.