ROUGEMONT, QC, Aug. 7, 2020 /CNW Telbec/ - Lassonde Industries Inc. (TSX: LAS.A) ("Lassonde") posted sales of $498.2 million in the second quarter of 2020, up 18.7% year over year. Excluding the $35.8 million in sales from Sun-Rype, an entity acquired on January 3, 2020, and an $11.1 million favourable foreign exchange impact, adjusted sales were up 7.5% year over year. The Company's operating profit for the second quarter of 2020 totalled $42.7 million, up $15.2 million from $27.5 million in operating profit in the same quarter last year. The 2020 second–quarter profit attributable to the Company's shareholders totalled $26.0 million, up $10.4 million year over year.
Financial highlights (in thousands of $) |
Second quarters ended |
|||
June 27, 2020 |
June 29, 2019 |
|||
Sales |
$ |
498,207 |
$ |
419,746 |
Operating profit |
42,658 |
27,549 |
||
Profit before income taxes |
37,096 |
21,164 |
||
Profit attributable to the Company's shareholders |
25,998 |
15,600 |
||
Basic and diluted earnings per share (in $) |
$ |
3.75 |
$ |
2.25 |
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 27, 2020 are available on the SEDAR website at www.sedar.com and on the website of Lassonde Industries Inc. |
"In the current pandemic environment, demand for our products rose significantly during the second quarter of 2020, which had a favourable impact on our results. A 7.5% increase in adjusted sales has helped raise the utilization rate of our U.S. assets. We are working diligently to meet product demand while maintaining a safe environment based on the recommendations of the public health authorities for all our employees. We are seeing that industry volumes remain high, but it is too early to determine whether this phenomenon is sustainable. We would again like to draw very special attention to the dedication shown by our employees during this difficult period," said the Chief Executive Officer of Lassonde Industries Inc., Nathalie Lassonde.
Financial results
On January 3, 2020, the Company completed the acquisition of Sun-Rype for a cash consideration of $89.3 million that was paid at the close of the transaction. This amount included preliminary adjustments related to cash, working capital, and property, plant and equipment. During the second quarter of 2020, an amount of $2.2 million was received from the seller following the final settlement of adjustments related to working capital and other items. As part of the transaction, the Company assumed liabilities of $23.0 million related to lease liabilities for the Sun-Rype facilities. The acquisition was financed by the Company's existing Canadian credit facility. The transaction costs, incurred mainly in the fourth quarter of 2019, were $1.5 million. The Company has recognized this business combination using the acquisition method in accordance with the provisions of IFRS 3. Therefore, the interim consolidated financial statements for the second quarter of 2020 include the results of Sun-Rype from January 3, 2020 to June 27, 2020.
For the second quarter of 2020, the Company's sales totalled $498.2 million, up $78.5 million or 18.7% from $419.7 million in the same quarter of 2019. Sales from Sun-Rype added $35.8 million to the Company's second-quarter sales. Excluding Sun-Rype's sales and an $11.1 million favourable foreign exchange impact, the Company's second-quarter sales were up $31.6 million or 7.5% year over year. This increase was largely due to an increase in sales of private label products, mainly in the United States. The Company believes that a significant portion of this increase could be due to changes in food habits related to COVID-19 impacts as industry sales volumes have benefited from a notable increase. For the first six months of 2020, sales totalled $970.7 million, up 17.9% from $823.3 million in the first six months of 2019.
The Company's operating profit for the second quarter of 2020 totalled $42.7 million, up $15.2 million from $27.5 million in the same quarter last year. As for Sun-Rype, it posted $3.3 million in operating profit. Excluding the impact of the Sun-Rype acquisition, the Company's second-quarter operating profit was up $11.9 million year over year. This increase was explained by a higher gross margin from the Company's U.S. and Canadian operations mainly due to an increase in U.S. sales volume and to a decrease in the cost of certain raw materials, partly offset by additional production costs related to the pandemic. The operating profit was also affected by higher performance-related salary expenses partly offset by lower selling and marketing expenses. Operating profit for the first six months of 2020 totalled $73.0 million, up $22.1 million from $50.9 million in the first six months of 2019.
The Company's financial expenses went from $4.9 million in the second quarter of 2019 to $4.5 million in the second quarter of 2020. Excluding $0.6 million in interest expense related to the Sun-Rype acquisition, financial expenses were down $1.0 million. This decrease was essentially due to a decrease in the interest expense on long-term debt. For the six-month periods, financial expenses went from $9.8 million in 2019 to $9.6 million in 2020.
"Other (gains) losses" went from a $1.5 million loss in the second quarter of 2019 to a $0.7 million loss in the second quarter of 2020. This 2020 second-quarter loss was mainly due to $0.8 million in foreign exchange losses, whereas the 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 Old Orchard Brands, LLC ("OOB") to cover frozen concentrated orange juice price fluctuations. For the six–month periods, the "Other (gains) losses" item was a $2.7 million gain in 2020 compared to a $2.6 million loss in 2019.
Profit before income taxes stood at $37.1 million in the second quarter of 2020, up $15.9 million from $21.2 million in the second quarter of 2019. For the first six months of 2020, profit before income taxes stood at $65.6 million, up $27.1 million from $38.5 million in the first six months of 2019.
Income tax expense went from $5.0 million in the second quarter of 2019 to $9.6 million in the second quarter of 2020. At 25.8%, the 2020 second-quarter effective income tax rate was higher than the 23.5% rate in the same quarter of 2019. This higher 2020 effective tax rate mainly reflects a decrease in the deductible amounts on the Company's interest expense. Income tax expense for the first six months of 2020 stood at $14.3 million, up $4.7 million from $9.6 million in the first six months of 2019.
The 2020 second-quarter profit totalled $27.5 million, up $11.3 million from $16.2 million in the second quarter of 2019. It should be noted that the current quarter's results include a profit of $2.0 million from Sun-Rype and an amount of $0.3 million, net of tax, in additional financial expenses related to the financing of the acquisition. For the first six months of 2020, profit totalled $51.3 million versus profit of $29.0 million in the first six months of 2019.
Profit attributable to the Company's shareholders was $26.0 million, resulting in basic and diluted earnings per share of $3.75 for the second quarter of 2020. In the second quarter of 2019, profit attributable to the Company's shareholders had totalled $15.6 million, resulting in basic and diluted earnings per share of $2.25. Excluding the impacts of the Sun-Rype acquisition, the 2020 second-quarter profit attributable to the Company's shareholders was up $8.8 million year over year. For the first six months of 2020, profit attributable to the Company's shareholders totalled $48.9 million, resulting in basic and diluted earnings per share of $7.06 and, in the same six-month period of 2019, profit had totalled $28.2 million, resulting in basic and diluted earnings per share of $4.05.
The Company's operating activities generated $78.1 million in cash during the second quarter of 2020, while they had generated $11.3 million in cash during the same quarter last year. As for Sun-Rype's operating activities, they used $1.5 million in cash during the second quarter of 2020. Financing activities used $98.7 million in cash during the second quarter of 2020, while they had generated $1.3 million in the same quarter of 2019. Investing activities used $5.7 million in cash during the second quarter of 2020 compared to $18.2 million used in the same quarter of 2019. At the end of the second quarter of fiscal 2020, the Company reported a cash and cash equivalents balance of $5.3 million and the bank overdraft balance was $Nil, whereas, at the end of the second quarter of 2019, the cash and cash equivalents balance was $1.0 million and the bank overdraft balance was $8.6 million.
Outlook
For the twelve–month period ended June 27, 2020, the Company saw a slight growth in industry sales volumes in the U.S. and Canadian fruit juice and drinks markets. Moreover, industry sales volumes have increased significantly over the twelve-week period ended June 27, 2020, in both Canada and the United States. Excluding Sun-Rype's sales and foreign exchange impacts, the Company's sales were up 7.5% in the second quarter of 2020 compared to the same quarter in 2019. It believes that a non-negligible portion of this increase could be due to the direct and indirect effects of the pandemic on consumer behaviour. There is no reliable way to determine whether these changes in purchasing habits are permanent or will fade when COVID-19 is a thing of the past. Barring any significant external shocks, including the impacts of COVID-19's evolution (and excluding foreign exchange impacts and the impact of the Sun-Rype acquisition to maintain a comparable basis), the Company expects that, for 2020, it will be able to achieve a consolidated annual sales growth rate above that of 2019 without a marked decrease in its current growth rate for the remainder of the fiscal year. However, the uncertainty surrounding such a forecast is higher than it is under normal circumstances, as the impact in 2020 of the lockdown and physical distancing measures on demand for the Company's products is hard to measure and the strength of the economic recovery that will follow cannot be determined from historical data. The Company remains concerned about how the crisis will affect sales to the food service segment.
During the second quarter of 2020, the Company observed improved profitability at its U.S. operations due to strong demand for its products during the quarter. In Canada, there was improvement in the production rate at one of its specialty food products plants, which was significantly affected by investment-related activities in 2019.
About Lassonde
Lassonde Industries Inc. is a North American leader in the development, manufacture and sale of ready-to-drink juices and drinks marketed under brands such as Apple & Eve, Everfresh, Fairlee, Fruité, Graves, Oasis, Old Orchard, Rougemont and Sun-Rype. Lassonde is the largest producer of fruit and vegetable juices and drinks in Canada and one of the two largest producers of store brand shelf-stable fruit juices and drinks in the United States. It is also a major producer of cranberry sauces. The Company also produces fruit-based snacks in the form of bars and bites.
Lassonde also develops, manufactures and markets specialty food products under brands such as Antico and Canton. The Company also 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 2,600 people working in 18 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
Share this article