ROUGEMONT, QC, May 9, 2018 /CNW Telbec/ - Lassonde Industries Inc. (TSX: LAS.A) ("Lassonde") posted sales of $357.7 million in the first quarter of 2018. Excluding a $9.8 million unfavourable foreign exchange impact, adjusted sales were down 0.9% year over year. Profit attributable to the Company's shareholders for this period totalled $14.5 million, up $1.4 million or 11.2% from the first quarter of 2017.
| Financial highlights (in thousands of dollars) |
First quarters |
||||
| March 31, 2018 |
April 1, 2017 |
||||
| Sales |
$ |
357,698 |
$ |
370,738 |
|
| Operating profit |
22,341 |
23,666 |
|||
| Profit before income taxes |
20,130 |
20,256 |
|||
| Profit attributable to the Company's shareholders |
14,546 |
13,086 |
|||
| Basic and diluted earnings per share (in $) |
$ |
2.08 |
$ |
1.87 |
|
Note: These are financial highlights only. Management's Discussion and Analysis, the unaudited interim condensed consolidated financial statements and notes thereto for the quarter ended March 31, 2018 are available on the SEDAR website at www.sedar.com and on the website of Lassonde Industries Inc.
"The Company's sales and operating profit were slightly below expectations despite good performance from our Canadian operations. These results reflect an intensification of competitive activity in the United States. Barring any significant external shocks, and excluding the anticipated impacts of the acquisition of Old Orchard Brands, we remain confident that our annual sales growth for 2018 will be slightly below that of 2017," said Pierre-Paul Lassonde, Chairman of the Board and Chief Executive Officer of Lassonde Industries Inc.
Financial results
For the first quarter of 2018, the Company's sales totalled $357.7 million, down $13.0 million or 3.5% from $370.7 million in the first quarter of 2017. Excluding a $9.8 million unfavourable foreign exchange impact, sales decreased by $3.2 million (0.9%), largely due to an unfavourable price impact in the United States and a decrease in the sales volume of national brands.
The Company's operating profit for the first quarter of 2018 totalled $22.3 million compared to $23.7 million in the same quarter last year, a $1.4 million year‑over‑year decrease attributable mainly to a lower contribution margin resulting from lower sales in the U.S. entities and to an increase in the cost of certain raw materials and transportation costs, partly offset by lower orange concentrate costs and lower performance-related salary expenses.
The Company's financial expenses went from $3.3 million in the first quarter of 2017 to $2.2 million in the first quarter of 2018. This $1.1 million decrease was mainly due to a $0.8 million decrease in long-term debt interest expense resulting from a reduction in indebtedness. The amortization of transaction costs was also down, decreasing by $0.2 million.
"Other (gains) losses" went from a $0.1 million loss in the first quarter of 2017 to a less than $0.1 million loss in the first quarter of 2018. These losses were essentially due to foreign exchange losses.
Profit before income taxes stood at $20.1 million in the first quarter of 2018, down $0.2 million from $20.3 million in the first quarter of 2017.
Income tax expense went from $6.3 million in the first quarter of 2017 to $5.3 million in the first quarter of 2018. At 26.2%, the 2018 first-quarter effective income tax rate was lower than the 31.2% rate in the same quarter of 2017. This lower effective income tax rate mainly reflects the impact of a reduced tax rate following the U.S. tax reform adopted in December 2017.
The 2018 first-quarter profit totalled $14.9 million, up $1.0 million from $13.9 million in the first quarter of 2017.
The 2018 first-quarter profit attributable to the Company's shareholders was $14.5 million, resulting in basic and diluted earnings per share of $2.08. In the first quarter of 2017, profit attributable to the Company's shareholders had totalled $13.1 million, resulting in basic and diluted earnings per share of $1.87.
Cash flows from operating activities used $2.1 million in cash during the first quarter of 2018, while they had generated $0.4 million in cash during the same quarter last year. Financing activities used $2.6 million in the first quarter of 2018, while these activities had generated $3.6 million in the same quarter of 2017. Investing activities used $9.4 million in the first quarter of 2018 compared to $7.9 million used in the same quarter of 2017. At the end of the first quarter of 2018, the Company reported a cash and cash equivalents balance of $1.3 million and a bank overdraft of $4.3 million compared to a cash and cash equivalents balance of $0.5 million and a bank overdraft of $10.0 million at the end of the first quarter of 2017.
Outlook
The Company noted that industry volumes for the U.S. fruit juice and drinks market were down for the twelve-month period ended March 31, 2018. In the Canadian market, the situation is similar, as industry sales were also down when compared to the same period of last year. The Company does not see any signs of this trend reversing in the next three quarters of 2018. The Company is seeking to limit the impact of this relative weakness in demand through national brand product innovation and continued private label customer development. It has observed, among other things, solid progress in its Canadian sales of low-calorie products during the first quarter of 2018.
On April 26, 2018, the Company announced that it reached an agreement to acquire Old Orchard Brands, LLC ("OOB") for a total cash consideration of US$146.0 million (subject to working capital and other adjustments) payable upon closing of the transaction. By way of additional consideration, a further amount of up to US$10.0 million may be payable over the next two years subject to specified milestones related to EBITDA. In addition, the Company has agreed to purchase the plant and land occupied by OOB for US$4.0 million subject to satisfaction of certain regulatory conditions. The closing of the transaction is also subject to standard terms and conditions, including obtaining regulatory approvals. For a better understanding of the potential impacts of this agreement, readers should note that, for the 12-month period ending December 31, 2017, OOB had sales of US$103.3 million and adjusted EBITDA of approximately US$15.8 million. The closing of the acquisition agreement will have other significant impacts on the Company's results, as the acquisition will be financed by a US$146.0 million credit facility containing terms and conditions similar to the current term loan of Lassonde Pappas and Company, Inc. The related financing costs are estimated at US$2.0 million while the other transaction-related costs are also estimated at US$2.0 million.
The Company's sales were down 3.5% in the first quarter of 2018 when compared to the first quarter of 2017. Excluding foreign exchange impacts, the adjusted decrease was 0.9%. Barring any significant external shocks (and excluding foreign exchange impacts and the anticipated impact of the agreement to acquire OOB to maintain a comparable basis), the Company remains confident that, for 2018, its consolidated annual sales growth rate will be slightly below that of 2017. It should be noted, however, that this forecast could be affected by the impact of recent price adjustments made necessary by increases in costs that particularly affected the Company's U.S. entities. The Company is also seeing more intense competitive activity in the U.S. market, following an ownership change affecting its biggest U.S. competitor, and paying close attention to the revision of Canada's Food Guide and its potential impacts.
The Company expects its use of investing cash flows for capital assets to be significantly higher in 2018 than the average of the past five years. The Company believes that most of these cash outflows will affect the last two quarters of 2018, as two major investment projects will be undertaken to provide the Company with additional capacity to support growth in fruit juice and drinks and specialty food products. The Company believes that its use of investing cash flows for capital assets could reach between $55 million and $65 million in 2018. These disbursements will not have an immediate impact on the Company's profit for 2018 and will solely affect its cash flows.
About Lassonde
Lassonde Industries Inc. is a North American leader in the development, manufacture and sale of a wide range of ready-to-drink fruit and vegetable juices and drinks marketed under brands such as Apple & Eve, Everfresh, Fairlee, Fruité, Graves, Oasis and Rougemont.
Lassonde is also one of the two largest producers of store brand shelf-stable fruit juices and drinks in the United States and a major producer of cranberry sauces.
Lassonde also develops, manufactures and markets specialty food products under brands such as Antico and Canton. The Company imports and markets selected wines from various countries and manufactures apple ciders and cider-based beverages.
The Company produces superior quality products through the expertise of approximately 2,100 people working in 14 plants across Canada and the United States. To learn more, visit www.lassonde.com.
SEDAR registration number: 00002099
Caution Concerning Forward-Looking Statements
This press release contains forward-looking statements that are based on certain assumptions. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. Additional factors are discussed in materials filed from time to time with the securities regulatory authorities in Canada. Lassonde Industries Inc. disclaims any intention or obligation to update or revise any forward-looking statements except as required by law.
SOURCE Lassonde Industries Inc.
Investor contact: Guy Blanchette, FCPA, FCA, Executive Vice-President and Chief Financial Officer, Lassonde Industries Inc., 450-469-4926, extension 10782; Media contact: Stefano Bertolli, Vice-President Communications, Lassonde Industries Inc., 450-469-4926, extension 10265
Share this article