ROUGEMONT, QC, Nov. 9, 2018 /CNW Telbec/ - Lassonde Industries Inc. (TSX: LAS.A) ("Lassonde") posted sales of $418.6 million in the third quarter of 2018. Excluding the $28.9 million in sales by Old Orchard Brands, LLC ("OOB") and a $9.5 million favourable foreign exchange impact, sales were up 2.9% year over year. Profit attributable to the Company's shareholders totalled $18.0 million. Excluding the impacts of the OOB acquisition, the 2018 third-quarter profit attributable to the Company's shareholders would have been $19.1 million, down $1.0 million year over year.
Financial highlights (in thousands of dollars) |
Third quarters ended |
|||||
September 29, 2018 |
September 30, 2017 |
|||||
Sales |
$ |
418,645 |
$ |
369,484 |
||
Operating profit |
29,064 |
33,963 |
||||
Profit before income taxes |
23,633 |
31,274 |
||||
Profit attributable to the Company's shareholders |
17,979 |
20,064 |
||||
Basic and diluted earnings per share (in $) |
$ |
2.57 |
$ |
2.87 |
||
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 September 29, 2018 are available on the SEDAR website at www.sedar.com and on the website of Lassonde Industries Inc. |
"Third-quarter sales were in line with our expectations, while the Company's operating profit suffered from inflationary pressures that affected the transportation and input costs of our U.S. operations. The adjustments to selling prices required to offset these increases are taking longer than expected, which is affecting profit margins," said Pierre-Paul Lassonde, Chairman of the Board and Chief Executive Officer of Lassonde Industries Inc.
Financial results
On May 31, 2018, the Company completed the acquisition of OOB for a total cash consideration of US$148.9 million, which was paid at the close of the transaction. This amount includes US$2.9 million in preliminary working capital adjustments and is subject to potential additional working capital and other adjustments. A contingent consideration of up to US$10.0 million may be payable over the next two years subject to specified financial milestones based on adjusted EBITDA. At the close of the transaction, an amount of US$152.1 million was paid to settle the OOB acquisition cost and related charges. In addition, on August 30, 2018, the Company finalized the purchase of the plant and land for US$4.0 million. The Company recognized this business combination using the acquisition method in accordance with the provisions of IFRS 3. Therefore, the interim consolidated financial statements for the third quarter of 2018 include the results of OOB from May 31, 2018 to September 29, 2018 and certain transaction fees related to the acquisition. Note 6 to the interim consolidated financial statements for the third quarter of 2018 contains additional information about the acquisition, including information on the acquisition financing and related costs.
For the third quarter of 2018, the Company's sales totalled $418.6 million, up $49.1 million or 13.3% from $369.5 million in the third quarter of 2017. Sales from OOB added $28.9 million to the Company's third-quarter sales. Excluding OOB's sales and a $9.5 million favourable foreign exchange impact, the Company's third-quarter sales increased by $10.7 million (2.9%) year over year, largely due to higher sales of private label products. For the first nine months of 2018, sales totalled $1,167.2 million, up 3.9% from $1,123.6 million in the first nine months of 2017.
The Company's operating profit for the third quarter of 2018 totalled $29.1 million, down $4.9 million from $34.0 million in the same quarter last year. As for OOB, it posted $1.1 million in operating profit. Excluding the impact of the OOB acquisition, the Company's third-quarter operating profit was down $6.0 million year over year. This decrease came mainly from a lower contribution margin realized by U.S. operations largely resulting from a notable increase in transportation costs and from higher input costs. As for the Canadian operations, the contribution margin is higher than last year, mostly due to a favourable decision by a U.S. administrative tribunal on product classification. This decision has reduced customs duties paid in previous years. Excluding this item, the contribution margin of the Canadian operations remained stable year over year despite higher transportation costs and an increase in the cost of certain raw materials. Operating profit for the first nine months of 2018 totalled $79.4 million, down $11.7 million from $91.1 million in the first nine months of 2017.
The Company's financial expenses went from $2.9 million in the third quarter of 2017 to $5.1 million in the third quarter of 2018. Excluding $2.5 million in interest expense related to the financing of the OOB acquisition, financial expenses were down $0.3 million. This decrease came essentially from a $0.3 million decrease in the amortization of transaction costs. For the nine-month periods, financial expenses went from $9.3 million in 2017 to $10.6 million in 2018.
"Other (gains) losses" went from a $0.2 million gain in the third quarter of 2017 to a $0.3 million loss in the third quarter of 2018. The 2017 third-quarter gain of $0.2 million was essentially due to foreign exchange gains. The 2018 third-quarter loss of $0.3 million was mainly due to $0.2 million in foreign exchange losses and to a $0.2 million loss resulting from a change in the fair value of financial instruments. For the nine-month periods, the "Other (gains) losses" item was a $0.3 million loss in 2018 compared to a $0.2 million gain in 2017.
Profit before income taxes stood at $23.6 million in the third quarter of 2018, down $7.7 million from $31.3 million in the third quarter of 2017. For the first nine months of 2018, profit before income taxes stood at $68.5 million, down $13.4 million from $81.9 million in the first nine months of 2017.
Income tax expense went from $10.2 million in the third quarter of 2017 to $5.3 million in the third quarter of 2018. At 22.6%, the 2018 third-quarter effective income tax rate was lower than the 32.5% 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. Income tax expense for the first nine months of 2018 stood at $16.6 million, down $9.6 million from $26.2 million in the first nine months of 2017.
The 2018 third-quarter profit totalled $18.3 million, down $2.8 million from $21.1 million in the third quarter of 2017. It should be noted that the current quarter's results include $1.8 million, net of tax, in additional financial expenses related to the financing of the acquisition, and a profit of $0.6 million from OOB. For the first nine months of 2018, profit totalled $51.9 million versus profit of $55.7 million in the first nine months of 2017.
The 2018 third-quarter profit attributable to the Company's shareholders was $18.0 million, resulting in basic and diluted earnings per share of $2.57. In the third quarter of 2017, profit attributable to the Company's shareholders had totalled $20.1 million, resulting in basic and diluted earnings per share of $2.87. Excluding the impacts of the OOB acquisition, the 2018 third-quarter profit attributable to the Company's shareholders was down $1.0 million year over year. For the first nine months of 2018, profit attributable to the Company's shareholders totalled $50.6 million, resulting in basic and diluted earnings per share of $7.24 and, in the same nine-month period of 2017, profit had totalled $52.8 million, resulting in basic and diluted earnings per share of $7.55.
The Company's operating activities generated $39.3 million in cash during the third quarter of 2018, while they had generated $31.6 million in cash during the same quarter last year. As for OOB's operating activities, they generated $3.5 million in cash during the third quarter of 2018. Financing activities used $18.4 million in cash during the third quarter of 2018, while they had used $23.3 million in the same quarter of 2017. Investing activities used $14.2 million in cash during the third quarter of 2018 compared to $6.7 million used in the same quarter of 2017. At the end of the third quarter of fiscal 2018, the Company reported a cash and cash equivalents balance of $0.3 million and a bank overdraft of $8.4 million, whereas, at the end of the third quarter of 2017, the cash and cash equivalents balance was $9.3 million and the bank overdraft balance was $3.3 million.
Outlook
The Company noted that industry volumes for the U.S. fruit juice and drinks market were down slightly for the twelve-month period ended September 29, 2018. In the Canadian market, the situation is different, as industry sales were up slightly when compared to the same period last year. The Company is seeking to limit the impact of the relative weakness in demand through national brand product innovation and continued private label customer development.
The Company's sales were up 13.3% in the third quarter of 2018 when compared to the same quarter of 2017. Excluding the foreign exchange impacts and the impact of the OOB acquisition, the adjusted increase was 2.9%. 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 2018, its consolidated annual sales growth rate will be slightly below that of 2017.
The Company remains concerned, however, by the significant cost increases affecting both transportation and the resin used in the manufacture of its plastic bottles, in a competitive landscape that has become more difficult following an ownership change affecting its largest U.S. competitor. The price adjustments required to offset these cost increases are taking longer than expected. Given this environment, the Company expects a slight decline in operating profit in the last quarter of 2018 compared to the same period of 2017. It believes that the price increases will continue to gradually take effect in 2019. In Canada, the Company is also paying close attention to the revision of Canada's Food Guide and its potential impacts.
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.
In May 2018, Lassonde acquired Old Orchard Brands, LLC, a fruit juice and beverage manufacturing company based in Sparta, Michigan. OOB's product portfolio consists of nearly 100 different varieties, including 100% juice, 100% juice blends, reduced-sugar juice cocktails, lemonades and flavoured teas. OOB is a leader in ready-to-drink fruit juices and drinks in the Central United States. Old Orchard is also the second largest frozen juice concentrates brand in the United States.
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.
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
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