ROUGEMONT, QC, Aug. 9, 2019 /CNW Telbec/ - Lassonde Industries Inc. (TSX: LAS.A) ("Lassonde") posted sales of $419.7 million in the second quarter of 2019. Excluding an $8.1 million favourable foreign exchange impact, second-quarter sales were up 5.3% year over year. The Company's operating profit for the second quarter of 2019 totalled $27.5 million, down $0.5 million from $28.0 million in the same quarter last year. Second-quarter profit attributable to the Company's shareholders totalled $15.6 million, down $2.5 million year over year.
Financial highlights (in thousands of dollars) |
Second quarters ended |
|||||
June 29, 2019 |
June 30, 2018 |
|||||
Sales |
$ |
419,746 |
$ |
390,854 |
||
Operating profit |
27,549 |
28,042 |
||||
Profit before income taxes |
21,164 |
24,754 |
||||
Profit attributable to the Company's shareholders |
15,600 |
18,087 |
||||
Basic and diluted earnings per share (in $) |
$ |
2.25 |
$ |
2.59 |
||
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 June 29, 2019 are available on the SEDAR website at www.sedar.com and on the website of Lassonde Industries Inc.
"The Company's 2019 second-quarter sales and operating profit were slightly below our expectations. In the United States, trade disputes continued to affect the cost of apple concentrate, and selling price adjustments are being implemented at a pace that reflects the challenging competitive environment in which Lassonde is operating," said Nathalie Lassonde, Chief Executive Officer of Lassonde Industries Inc.
Financial Results
For the second quarter of 2019, the Company's sales totalled $419.7 million, up $28.8 million or 7.4% from $390.9 million in the second quarter of 2018. Sales from Old Orchard Brands, LLC ("OOB") stood at $31.7 million in the second quarter of 2019. OOB's sales had reached $12.4 million for the period of May 31, 2018 (the date when OOB began operating under the Company's control) to June 30, 2018. Excluding OOB's sales and an $8.1 million favourable foreign exchange impact, the Company's second-quarter sales were up $1.4 million (0.4%) year over year. This increase was mainly due to an increase in sales of private label products, partly offset by a decrease in sales of national brand products. For the first six months of 2019, sales totalled $823.3 million, up 10.0% from $748.6 million in the first six months of 2018.
The Company's operating profit for the second quarter of 2019 totalled $27.5 million, down $0.5 million from $28.0 million in the same quarter last year. OOB's operating profit was $4.1 million during the second quarter of 2019. For the period of May 31, 2018 to June 30, 2018, OOB had generated $0.2 million in operating profit, and, during the second quarter of 2018, the Company had incurred $1.5 million in expenses related to the OOB acquisition. Excluding the impact of the OOB acquisition, the Company's 2019 second-quarter operating profit was down $5.9 million year over year. This decrease was due to a lower gross margin from the Company's U.S. operations largely resulting from higher input costs, particularly affecting apple concentrate. As for the Canadian operations, the second-quarter gross margin was higher than that of the same quarter last year, mostly due to selling price adjustments, partly offset by an unfavourable foreign exchange impact, higher input costs, and the impact of a slower rate of production resulting from investment-related activities in one of the Company's plants. The decrease in the Company's operating profit was also due to higher selling and administrative expenses explained by an unfavourable change in transportation costs and by an increase in marketing expenses aimed at intensifying the promotion of new products, partly offset by lower performance-related salary expenses. It should be noted that the adoption of IFRS 16 on January 1, 2019 had a $0.2 million favourable impact on the 2019 second-quarter operating profit. Operating profit for the first six months of 2019 totalled $50.9 million, up $0.5 million from $50.4 million in the first six months of 2018.
The Company's financial expenses went from $3.3 million in the second quarter of 2018 to $4.9 million in the second quarter of 2019. This increase was due to a $2.0 million increase in interest expense related to the financing of the OOB acquisition. Excluding this additional interest expense, financial expenses were down $0.4 million, essentially due to a $0.7 million decrease in the interest on long-term debt, partly offset by a $0.3 million interest expense on lease liabilities resulting from the adoption of IFRS 16 on January 1, 2019. For the six-month periods, financial expenses went from $5.5 million in 2018 to $9.8 million in 2019.
"Other (gains) losses" went from a less-than-$0.1 million gain in the second quarter of 2018 to a $1.5 million loss in the second quarter of 2019. This 2019 second-quarter loss was mainly due to a $1.5 million loss resulting from a change in the fair value of financial instruments held by OOB to cover frozen concentrated orange juice price fluctuations, whereas the 2018 second-quarter gain was essentially due to foreign exchange gains. For the six-month periods, the "Other (gains) losses" item was a $2.6 million loss in 2019 compared to a less-than-$0.1 million gain in 2018.
Profit before income taxes stood at $21.2 million in the second quarter of 2019, down $3.6 million from $24.8 million in the second quarter of 2018. For the first six months of 2019, profit before income taxes stood at $38.5 million, down $6.4 million from $44.9 million in the first six months of 2018.
Income tax expense went from $6.0 million in the second quarter of 2018 to $5.0 million in the second quarter of 2019. At 23.5%, the 2019 second-quarter effective income tax rate was lower than the 24.1% rate in the same quarter of 2018. Income tax expense for the first six months of 2019 stood at $9.6 million, down $1.6 million from $11.2 million in the first six months of 2018.
The 2019 second-quarter profit totalled $16.2 million, down $2.6 million from $18.8 million in the second quarter of 2018. It should be noted that the current quarter's results include a profit of $1.9 million from OOB, and $1.5 million, net of tax, in additional financial expenses related to the financing of the OOB acquisition, whereas in 2018, the second quarter had included a profit of $0.1 million from OOB, and $1.1 million, net of tax, in OOB acquisition-related expenses. Excluding the impact of the OOB acquisition, the Company's 2019 second-quarter profit was down $4.0 million year over year. For the first six months of 2019, profit totalled $29.0 million versus profit of $33.6 million in the first six months of 2018.
The 2019 second-quarter profit attributable to the Company's shareholders was $15.6 million, resulting in basic and diluted earnings per share of $2.25. In the second quarter of 2018, profit attributable to the Company's shareholders had totalled $18.1 million, resulting in basic and diluted earnings per share of $2.59. Excluding the impact of the OOB acquisition, the 2019 second-quarter profit attributable to the Company's shareholders was down $3.7 million year over year. For the first six months of 2019, profit attributable to the Company's shareholders totalled $28.2 million, resulting in basic and diluted earnings per share of $4.05 and, in the same six-month period of 2018, profit had totalled $32.6 million, resulting in basic and diluted earnings per share of $4.67.
The Company's operating activities generated $11.3 million in cash during the second quarter of 2019, while they had generated $12.0 million in cash during the same quarter last year. The cash flows generated by OOB's operating activities amounted to $3.3 million in the second quarter of 2019, while they had generated $2.3 million in cash for the period of May 31, 2018 to June 30, 2018. Financing activities generated $1.3 million in cash during the second quarter of 2019, while they had generated $175.4 million in the same quarter of 2018. During the second quarter of 2018, cash flows generated for the OOB acquisition had totalled $193.6 million, leaving a difference of $19.5 million on a comparative basis. Investing activities used $18.2 million in cash during the second quarter of 2019 compared to $199.3 million used in the same quarter of 2018. Excluding the $191.7 million in cash flows related to the OOB acquisition in 2018, investing activities used $10.6 million more cash when compared to the second quarter of 2018. At the end of the second quarter of fiscal 2019, the Company reported a cash and cash equivalents balance of $1.0 million and a bank overdraft of $8.6 million, whereas, at the end of the second quarter of 2018, the cash and cash equivalents balance was $0.3 million and the bank overdraft balance was $15.3 million.
Outlook
The Company notes that industry volumes for U.S. and Canadian fruit juice and drinks markets were down slightly for the twelve-month period ended June 29, 2019. The Company's sales were up 7.4% in the second quarter of 2019 compared to the same period last year. Excluding foreign exchange impacts and the impact of the OOB acquisition, the adjusted sales increase was 0.4%. Barring any significant external shocks (and excluding foreign exchange impacts and the impact of the OOB acquisition to maintain a comparable basis), the Company expects that, for 2019, its consolidated annual sales growth rate will be slightly above that of 2018.
The selling price increases in the U.S. market continued to gradually take effect in the second quarter of 2019. The Company has also noted that a major private label sales contract, previously disclosed, is now in force in all of the territories that it covers, but order volume is being slowed by the depletion of inventories that the client had on hand on the transition date. The Company remains cautious in a U.S. competitive environment that has become particularly difficult. In Canada, the Company believes that investment-related activities could adversely affect the rate of production at one of its plants in the next quarter. In addition, it is paying attention to the potential impacts of changes made to Canada's Food Guide but has not yet observed any significant impact on its sales.
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, Old Orchard 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 2,200 people working in 15 plants across Canada and the United States. To learn more, visit www.lassonde.com.
Caution Concerning Forward-Looking Statements
In this document and in other documents filed with Canadian regulatory authorities or in other communications, the Company may from time to time make written or oral forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements notably include estimates, expectations, forecasts, and projections of future investment spending, revenues, expenses, earnings, profit, indebtedness, financial position, losses, upcoming projects, business and management strategies, and business growth and expansion. In the context of this document, forward-looking statements are particularly used to discuss preliminary results, the rate of sales growth, and profit attributable to shareholders. The forward-looking statements contained herein are used to help readers better understand Lassonde's financial position and the results of its operations as at the dates presented and may not be appropriate for other purposes. Forward-looking statements can be recognized by such words as "may," "should," "believes," "predicts," "plans," "expects," "intends," "anticipates," "estimates," "projects," "objective," "continues," "proposes," "targets," or "aims" as well as words and expressions of a similar nature and whether they are used in the affirmative or negative or used in the conditional or future tense. Forward-looking statements also include any statements that do not refer to historical facts.
By their very nature, forward-looking statements are based on assumptions and involve inherent risks and uncertainties, both general and specific in nature. It is therefore possible that the forecasts, projections and other statements will not be achieved or will differ significantly from those expressed or implied in such forward-looking statements or could affect the extent to which a particular forecast, projection or other statement materializes. Although Lassonde believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurances that these expectations will prove to be correct.
Readers are cautioned against placing undue reliance on forward-looking statements when making decisions, as the actual results could differ considerably from the opinions, plans, objectives, expectations, forecasts, estimates and intentions expressed in such forward-looking statements due to various significant factors. Such factors include, among others, the economic, industrial, competitive and regulatory environment in which Lassonde operates or factors that are likely to have an impact on its operations, its ability to attract and retain customers, consumers, and qualified staff, the availability and cost of raw materials and transportation, its operating costs, and the price of its finished products in the various markets where it operates.
The Company cautions that the foregoing list of factors is not exhaustive. For additional information about the risks, uncertainties, and assumptions that could cause Lassonde's actual results to differ from its stated expectations, readers may also consult the "Uncertainties and Principal Risk Factors" section of the Company's most recent annual MD&A and the other documents it files from time to time with securities regulators in Canada and available on www.sedar.com. The forward-looking statements contained in this press release reflect the Company's expectations on this date and are subject to change after this date. Lassonde does not undertake to update publicly or to revise these forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable legislation or regulation.
SEDAR registration number: 00002099
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: Sylvain Morissette, Vice-President Communications, Lassonde Industries Inc., 450-469-4926, extension 10265
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