Business fundamentals stable despite
competitive pressures
Q2 2019 Highlights
- Revenues were $21.3 million,
down 3.0% from $21.9 million in
2018
- Gross margin was 12.8%, up from 11.2% last year
- EBITDA1 was $1.3
million ($1.0 million
excluding the impact of IFRS 16 2), versus
$1.7 million in 2018
- Excluding the impact of foreign exchange, EBITDA came in at
$1.6 million, up from $1.4 million in 2018
- Net income was $0.2 million,
versus $0.7 million in the prior
year
- Operating cash flows remained strong year-over year
MONTREAL, Aug. 27, 2019 /CNW Telbec/ - Imaflex Inc.
("Imaflex" or the "Corporation") (TSXV: IFX), announces its
consolidated financial results for the second quarter ended
June 30, 2019 and provides a business
update. All amounts are in Canadian dollars.
"Although we are in a very competitive industry, business
fundamentals remained stable during the quarter, supported by
higher sales volumes in our core business and solid cash flows,"
highlighted Mr. Joe Abbandonato,
President and Chief Executive Officer of Imaflex. "Our
ability to attract and retain customers attests to our
differentiated, competitive offerings and revenue pricing
strategy."
Consolidated
Financial Highlights (unaudited)
|
|
|
|
|
Three months ended
June 30,
|
Six months ended June
30,
|
CDN $ thousands,
except per share amounts
(or otherwise indicated)
|
2019
|
2018
|
% Change
|
2019
|
2018
|
% Change
|
Revenues
|
21,269
|
21,927
|
(3.0)%
|
43,136
|
42,544
|
1.4 %
|
Gross
Profit
|
2,712
|
2,460
|
10.2 %
|
5,784
|
6,063
|
(4.6)%
|
Selling & admin.
expenses
|
1,863
|
1,593
|
16.9 %
|
3,554
|
3,277
|
8.5 %
|
Foreign exchange
(gains) losses
|
366
|
(305)
|
(220.0) %
|
715
|
(696)
|
(202.7) %
|
Net income
|
205
|
727
|
(71.8)%
|
763
|
2,400
|
(68.2)%
|
Basic EPS
|
0.00
|
0.01
|
(100.0)%
|
0.02
|
0.05
|
(60.0)%
|
Diluted
EPS
|
0.00
|
0.01
|
(100.0)%
|
0.02
|
0.05
|
(60.0)%
|
Gross
margin
|
12.8%
|
11.2%
|
1.6 pp
|
13.4%
|
14.3%
|
(0.9) pp
|
Selling & admin.
expenses as % of revenues
|
8.8%
|
7.3%
|
1.5 pp
|
8.2%
|
7.7%
|
0.5 pp
|
EBITDA (Excluding
FX)
|
1,637
|
1,381
|
18.5 %
|
3,789
|
3,790
|
(0.0)%
|
EBITDA
|
1,271
|
1,686
|
(24.6)%
|
3,074
|
4,486
|
(31.5)%
|
EBITDA
margin
|
6.0%
|
7.7%
|
(1.7) pp
|
7.1%
|
10.5%
|
(3.4) pp
|
_______________________________________
|
1
|
EBITDA: Earnings
Before Interest, Taxes, Depreciation, and Amortization. See
"Caution Regarding Non-IFRS Financial Measures" which
follows.
|
2
|
IFRS 16, Leases: See
"Changes to Critical Accounting Policies" which follows.
|
Financial Review: Quarter and Year-to-Date Ended June 30
Revenues
Revenues were $21.3
million for the second quarter of 2019, down 3.0% from
$21.9 million in 2018. The
year-over-year decrease is largely due to reduced sales volumes for
Imaflex's metalized agriculture films and competitive pricing
pressures. This was partially offset by heightened sales
volumes in our core flexible packaging business, along with
favourable movements in foreign exchange. Citrus film sales
stood at $0.5 million for the
quarter, versus $1.0 million in the
second quarter of 2018.
For 2019 year-to-date, sales came in at $43.1 million, up 1.4% from $42.5 million in the corresponding prior-year
period. The increase was largely due to higher sales volumes
for our core flexible packaging products and favourable movements
in foreign exchange.
Gross Profit
Gross profit was $2.7 million or 12.8% of sales for the second
quarter of 2019, up from $2.5 million
and 11.2% of sales in the corresponding prior year quarter.
The improvement was largely a result of sales mix and higher sales
volumes.
For 2019 year-to-date, the gross profit was $5.8 million or 13.4% of sales, versus
$6.1 million and 14.3% of sales in
2018. The year-over-year decrease was largely due to competitive
pricing pressures.
Operating Expenses
Quarterly selling and
administrative expenses were $1.9
million or 8.8% of sales for the current quarter, versus
$1.6 million and 7.3% of sales in
2018. For the first half of 2019, selling and administrative
expenses were $3.6 million or 8.2% of
sales, versus $3.3 million and 7.7%
of sales in 2018. The year-over-year increases for the
quarter and year-to-date were mainly driven by an expanded sales
team to help stimulate demand for Imaflex's products, and in
anticipation of new production equipment coming on-line in the
near-term.
As a result of unfavourable currency fluctuations, Imaflex
recorded a foreign exchange loss of $0.4
million for the second quarter of 2019. Conversely, in
the corresponding prior-year period, the appreciation of the US
dollar against the Canadian dollar resulted in a foreign exchange
gain of $0.3 million.
Collectively, this generated a negative year-over-year variance of
$0.7 million.
Similarly, the Corporation recorded a $0.7 million foreign exchange loss for the
six-month period ending June 30,
2019, compared to a gain of $0.7
million in 2018. This resulted in a $1.4 million negative year-over-year impact on
operating results. The majority of the Corporation's foreign
exchange gains and losses are non-cash impacting and relate to
intercompany balances for which Imaflex can control the time of
settlement.
Net Income and EBITDA
Net income came in at
$0.2 million for the current quarter,
down from $0.7 million in 2018.
The decrease was largely due to the unfavourable
year-over-year movements in foreign exchange and higher selling and
administrative expenses, resulting from the strengthened sales
team. Net income was $0.8
million for the first half of 2019, compared to $2.4 million in 2018. The decrease was
driven by the unfavourable year-over-year movements in foreign
exchange, lower gross profits and higher selling and administrative
expenses.
EBITDA stood at $1.3 million
($1.0 million excluding the impact of
IFRS 16) or 6.0% of sales for the second quarter of 2019, down from
$1.7 million and 7.7% of sales in
2018. However, excluding the impact of foreign exchange,
EBITDA was $1.6 million (7.7% of
sales) for the current quarter, up from $1.4
million (6.3% of sales) in 2018.
For the first six months of 2019, EBITDA came in at $3.1 million ($2.5
million excluding IFRS 16) or 7.1% of sales as compared to
$4.5 million and 10.5% of sales
respectively in 2018. Excluding foreign exchange,
EBITDA was essentially unchanged year-over-year, coming in at
$3.8 million for the first half of
2019 and 2018.
Liquidity and Capital Resources
Net cash generated by
operating activities stood at $2.4
million for the current quarter, and $5.6 million for the first half of 2019.
This compares to $1.1 million of cash
outflows in the second quarter of 2018 and $0.1 million of cash inflows in the first six
months of 2018. The year-over-year improvement for the quarter and
year-to-date is mainly due to favourable movements in working
capital.
As at June 30, 2019, Imaflex had
approximately $7.2 million of cash
available for operating activities, including the unused portion
under its $12.0 million revolving
line of credit.
Assembly of New Coextruder Completed – Wiring
Underway
Assembly of the new five-layer extruder is finished
and electrical wiring is proceeding. This also includes
communication wiring to allow the electrical components to
"converse". At the same time, wiring of another piece of
equipment associated with Imaflex's major capital projects is
underway. "This second piece of equipment arrived ahead of
schedule, advancing its go-live date, but delaying that of the
extruder," said Mr. Abbandonato. The wiring process is
complex requiring many hours and teams of up to eight electricians
at a time. As such, Imaflex needs to work with a specialized
firm capable of working on projects of this magnitude. The
extruder is now expected to be operational in around six weeks.
ADVASEAL® Commercialization
Imaflex is currently
working with the contract manufacturer to refine the production
process for ADVASEAL®, including optimizing chemical solubility and
film characteristics. "Although close to completion, we were
not able to make the August 2019
planting window and thus deemed it prudent to move the field trials
to spring 2020," said Mr. Abbandonato. "Given the importance
of these trials, we did not want to risk starting them outside of
the recommended planting period as we would not have had meaningful
comparative data, such as weed control and crop yields, against a
control crop planted during the recommended
window."
Outlook
Although downward pricing pressures have
lessened in recent quarters, price competition remains high, which
is suppressing revenue growth. "This said, we continue to win
new business as reflected in the higher production volumes we are
seeing for our core products, albeit at a lower sales price point,"
said Mr. Abbandonato. "In spite of market volatility, we see
on-going stability in our operations, with the possibility of some
upside, due to the major capital projects coming on-line and an
enhanced sales team. Furthermore, we remain cautiously
optimistic citrus film demand will strengthen and continue to
believe in ADVASEAL®, a potentially transformational business
initiative. Despite some challenges and unforeseen timing
delays in our growth projects, we remain confident in the long-term
potential of
Imaflex."
Changes to Critical Accounting Policies
Effective
January 1, 2019, Imaflex adopted IFRS
16, Leases. Under IFRS 16, lessees are required to account
for leases on their balance sheet by recognizing a "right of use"
asset and a lease liability, essentially removing the distinction
between an operating and finance lease. Certain exemptions
exist for short-term leases and leases of low value assets.
Imaflex applied the modified retrospective method of application
and as such comparative prior-year information has not been
restated.
Caution Regarding Non-IFRS Financial Measures
The
Company's management uses a non-IFRS measure in this press release,
namely EBITDA (Earnings Before Interest, Taxes, Depreciation, and
Amortization) and EBITDA excluding foreign
exchange.
While EBITDA is not a standard International Financial Reporting
Standards (IFRS) measure, management, analysts, investors and
others use it as an indicator of the Company's financial and
operating management and performance. EBITDA should not be
construed as an alternative to net income determined in accordance
with IFRS as an indicator of the Company's performance. The
Company's method of calculating EBITDA may be different from those
used by other companies and accordingly it should not be considered
in isolation.
About Imaflex Inc.
Founded in 1994, Imaflex is
focused on the development and manufacturing of innovative
solutions for the flexible packaging space. Concurrently, the
Corporation develops and manufactures films for the agriculture
industry. The Corporation's products consist primarily of
polyethylene (plastic) film and bags, including metalized plastic
film, for the industrial, agricultural and consumer
markets. Headquartered in Montreal, Quebec, Imaflex has manufacturing
facilities in Canada and the
United States. The Corporation's common stock is listed on
the TSX Venture Exchange under the ticker symbol IFX.
Additional information is available at www.imaflex.com.
Cautionary Statement on Forward Looking Information
Certain information included in this press release constitutes
"forward-looking" statements within the meaning of Canadian
securities laws. Forward-looking statements are necessarily
based upon a number of estimates and assumptions that, while
considered reasonable by the management of the Corporation, are
inherently subject to significant business, economic and
competitive uncertainties, risks and contingencies. The
Corporation cautions the reader that such forward-looking
statements involve known and unknown risks, uncertainties and other
factors that may cause the actual financial results, performance or
achievements of Imaflex to be materially different from the
Corporation's estimated future results, performance or achievements
expressed or implied by those forward-looking statements and that
the forward-looking statements are not guarantees of future
performance. These statements are also based on certain
factors and assumptions. For more details on these estimates,
risks, assumptions and factors, see the Corporation's most recent
Management Discussion and Analysis filed on SEDAR at www.sedar.com
and on the investor section of the Corporation's website at
www.imaflex.com. The Corporation disclaims any obligation to
update or revise any forward-looking statements, whether as a
result of new information, events or otherwise, except as expressly
required by law. Readers are cautioned not to put undue
reliance on these forward-looking statements.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
SOURCE Imaflex Inc.