Q3 2019 Highlights
- Revenues were $19.2 million,
versus $21.3 million in 2018
- Gross margin was 13.1%, compared to 13.7% in the prior
year
- EBITDA1 was $1.7
million ($1.4 million
excluding the impact of IFRS 16 2), up from
$1.5 million in 2018
- Net income was $0.5 million,
versus $0.6 million in the prior
year
- Operating cash flows remained strong
MONTREAL, Nov. 25, 2019 /CNW Telbec/ - Imaflex Inc.
("Imaflex" or the "Corporation") (TSXV: IFX), announces its
consolidated financial results for the third quarter ended
September 30, 2019 and provides a
business update. All amounts are in Canadian dollars.
"During the quarter, we continued to hold our own in a dynamic
operating environment," highlighted Mr. Joe
Abbandonato, President and Chief Executive Officer of
Imaflex. "Despite lower sales prices resulting from
competitive pressures and decreased resin costs, year-over-year
profitability remained respectable and operating cash flows
continued to be solid." Going forward, the new extruder and
other major equipment purchases which recently came on-line provide
additional growth opportunities.
Consolidated
Financial Highlights (unaudited)
|
|
|
|
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
CDN $ thousands,
except per share
amounts (or otherwise indicated)
|
2019
|
2018
|
% Change
|
2019
|
2018
|
% Change
|
Revenues
|
19,195
|
21,316
|
(10.0)%
|
62,331
|
63,860
|
(2.4)%
|
Gross
Profit
|
2,521
|
2,929
|
(13.9)%
|
8,305
|
8,992
|
(7.6)%
|
Selling & admin.
expenses
|
1,812
|
1,726
|
5.0%
|
5,366
|
5,003
|
7.3%
|
Foreign exchange
(gains) losses
|
(217)
|
242
|
(189.7)%
|
498
|
(454)
|
(209.7)%
|
Net income
|
470
|
594
|
(20.9)%
|
1,233
|
2,994
|
(58.8)%
|
Basic EPS
|
0.01
|
0.01
|
0.0%
|
0.02
|
0.06
|
(66.7)%
|
Diluted
EPS
|
0.01
|
0.01
|
0.0%
|
0.02
|
0.06
|
(66.7)%
|
Gross
margin
|
13.1%
|
13.7%
|
(0.6)
pp
|
13.3%
|
14.1%
|
(0.8)
pp
|
Selling & admin.
expenses as % of revenues
|
9.4%
|
8.1%
|
1.3
pp
|
8.6%
|
7.8%
|
0.8
pp
|
EBITDA (Excluding
FX)
|
1,518
|
1,761
|
(13.8)%
|
5,307
|
5,551
|
(4.4)%
|
EBITDA
|
1,735
|
1,519
|
14.2%
|
4,809
|
6,005
|
(19.9)%
|
EBITDA
margin
|
9.0%
|
7.1%
|
1.9
pp
|
7.7%
|
9.4%
|
(1.7)
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 September 30
Revenues
Revenues were $19.2
million for the third quarter of 2019, versus $21.3 million in the corresponding prior-year
period. The decrease versus 2018 was largely due to product
pricing and reduced citrus film sales, which were $nil for the
current quarter, versus $0.4 million
in 2018. The reduced product pricing is largely a result of
competitive pressures and lower resin prices.
For 2019 year-to-date, sales came in at $62.3 million, down 2.4% from $63.9 million in 2018. The decrease was
largely due to product pricing and reduced sales of metalized
agriculture films, partially offset by favourable movements in
foreign exchange and higher core flexible packaging sales
volumes.
Gross Profit
Gross profit was $2.5 million or 13.1% of sales for the third
quarter of 2019, compared to $2.9
million and 13.7% of sales in the corresponding prior-year
quarter. For the year-to-date, the gross profit was
$8.3 million or 13.3% of sales in
2019, versus $9.0 million and 14.1%
of sales in 2018. The year-over-year decreases for the quarter and
year-to-date were largely due to product pricing and lower citrus
film sales.
Operating Expenses
Quarterly selling and
administrative expenses were $1.8
million or 9.4% of sales for the third quarter of 2019, up
from $1.7 million and 8.1% of sales
in 2018. For 2019 year-to-date, selling and administrative
expenses were $5.4 million or 8.6% of
sales, versus $5.0 million and 7.8%
of sales in 2018. The quarter and year-to-date expense
increases over 2018 were largely driven by an expanded sales team
to help stimulate demand for Imaflex's products and new production
equipment, including the Corporation's new five layer
extruder.
As a result of favourable currency fluctuations, Imaflex
recorded a foreign exchange gain of $0.2
million in the third quarter of 2019, versus a $0.2 million loss in 2018, resulting in a
favourable $0.4 million
year-over-year variance. However, for the year-to-date,
Imaflex generated a negative $1.0
million year-over-year foreign exchange variance, with the
Corporation realizing a foreign exchange loss of $0.5 million in the first nine months of 2019,
versus a $0.5 million gain in 2018.
The majority of these 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 was
$0.5 million for the third quarter of
2019, versus $0.6 million in the
prior year. The year-over-year decrease was mainly due to the
lower gross profit and higher selling and administrative
expenses. For the year-to-date, net income was $1.2 million, down from $3.0 million in 2018. The $1.8 million decrease versus 2018 was largely
driven by the $1.0 million
unfavourable year-over-year variance relating to movements in
foreign exchange, the lower gross profit and higher selling and
administrative expenses.
EBITDA stood at $1.7 million
($1.4 million excluding the impact of
IFRS 16) or 9.0% of sales for the third quarter of 2019, up from
$1.5 million and 7.1% of sales in the
corresponding prior-year period. Excluding the impact of
foreign exchange, EBITDA was $1.5
million (7.9% of sales) for the current quarter, versus
$1.8 million (8.3% of sales) in
2018.
For the first nine months of 2019, EBITDA came in at
$4.8 million ($3.9 million excluding IFRS 16) or 7.7% of sales
as compared to $6.0 million and 9.4%
of sales in 2018. Excluding foreign exchange, EBITDA
was $5.3 million or 8.5% of sales for
the first nine months of 2019, down slightly from
$5.6 million and 8.7% of sales in
2018.
Liquidity and Capital Resources
Net cash generated by
operating activities stood at $1.4
million and $7.0 million
respectively for the three and nine months ended September 30, 2019. This compares to cash
inflows of $0.4 million and
$0.5 million respectively for the
corresponding prior-year periods. The year-over-year
improvement for the quarter and year-to-date is mainly due to
favourable movements in working capital and lower income taxes
paid.
As at September 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.
All Major Capital Projects Undertaken Since 2018
Completed
All major equipment purchases made since 2018 are
now installed and operational, notably the Corporation's new
five-layer extruder. "This not only increases Imaflex's
manufacturing capacity by approximately 4.0 million pounds
annually, but also broadens our product capabilities and
addressable markets," said Mr. Abbandonato.
ADVASEAL® Commercialization
Imaflex,
together with the contract manufacturer, continues to make progress
refining the production process for ADVASEAL®. The
Corporation is increasingly confident field trials will begin in
spring 2020.
Outlook
"Although competition has eased in
recent quarters, it remains a dynamic pricing environment, which
continues to put pressure on revenues," highlighted Mr.
Abbandonato. "This said, our solid line-up of innovative
products is allowing us to attract and retain customers, albeit at
lower than historical sales price points." As well, all of the
major equipment projects undertaken since 2018 are now on-line,
which provides additional upside opportunities. "We will
continue to stay the course, building out our business, and
preparing for upcoming ADVASEAL® field trials. With
respect to our citrus film, we continue to believe in the benefits
it brings citrus growers and we remain cautiously optimistic demand
will build going forward."
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.