Business momentum continues; drives solid
top and bottom line growth
Third Quarter (Q3) 2020 Highlights
- Revenue growth accelerated, increasing 19.3% over Q3 2019 to
$22.9 million
- Gross margin reached 19.1%, versus 13.1% in the prior
year
- EBITDA1 came in at $3.0 million, up 70.2% over 2019; up 123.1% on a
constant currency basis
- Net income was $1.2
million, up 163% from $0.5
million in 2019
- Cash flow generation remained strong; ended the quarter with
$2.3 million of cash and no debt on
short term credit facility
MONTREAL, Nov. 25, 2020 /CNW Telbec/ - Imaflex Inc.
("Imaflex" or the "Corporation") (TSXV: IFX), announces its
consolidated financial results for the third quarter (Q3) ended
September 30, 2020 and provides a
business update. All amounts are in Canadian dollars.
"We had another solid quarter, with strong operational
performance and heightened year-over-year gains in revenues and
profitability," said Mr. Joe
Abbandonato, President and Chief Executive Officer of
Imaflex. "Our tightly managed balance sheet also continued to
strengthen, enhancing our financial flexibility and putting us in
one of the best financial positions we've seen in recent
years. We also achieved some important milestones with
ADVASEAL®, including positive field trial results from the Efficacy
Study validating the film's effectiveness as a pre-plant soil
fumigant replacement. This is shaping up to be a pivotal year
for Imaflex and we are pleased with the steady progress made on our
shareholder commitment to drive profitable growth, particularly
during this climate of uncertainty caused by COVID-19."
Consolidated Financial Highlights (unaudited)
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
CDN $ thousands,
except per share amounts
(or otherwise indicated)
|
2020
|
2019
|
% Change
|
2020
|
2019
|
% Change
|
Revenues
|
22,904
|
19,195
|
19.3 %
|
64,742
|
62,331
|
3.9 %
|
Gross
Profit
|
4,385
|
2,521
|
73.9 %
|
12,055
|
8,305
|
45.2 %
|
Selling & admin.
expenses
|
1,923
|
1,812
|
6.1 %
|
5,697
|
5,366
|
6.2 %
|
Foreign exchange
(gains) losses
|
434
|
(217)
|
(300.0) %
|
(432)
|
498
|
(186.7) %
|
Net income
|
1,236
|
470
|
163.0 %
|
4,670
|
1,233
|
278.8 %
|
Basic EPS
|
0.02
|
0.01
|
100.0 %
|
0.09
|
0.02
|
350.0 %
|
Diluted
EPS
|
0.02
|
0.01
|
100.0 %
|
0.09
|
0.02
|
350.0 %
|
Gross
margin
|
19.1%
|
13.1%
|
6.0
pp
|
18.6%
|
13.3%
|
5.3
pp
|
Selling & admin.
expenses as % of revenues
|
8.4%
|
9.4%
|
(1.0)
pp
|
8.8%
|
8.6%
|
0.2
pp
|
EBITDA (Excluding
FX)
|
3,387
|
1,518
|
123.1 %
|
9,110
|
5,307
|
71.7 %
|
EBITDA
|
2,953
|
1,735
|
70.2 %
|
9,542
|
4,809
|
98.4 %
|
EBITDA
margin
|
12.9%
|
9.0%
|
3.9
pp
|
14.7%
|
7.7%
|
7.0
pp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
EBITDA: Earnings
Before Interest, Taxes, Depreciation, and Amortization. See
"Caution Regarding Non-IFRS Financial Measures" which
follows.
|
Financial Review: Quarter ended September 30
Revenues
Revenues were up 19.3% over 2019, reaching
$22.9 million for the quarter.
Growth was driven by robust flexible packaging sales volumes, along
with heightened sales of agricultural films and converted
products. On a poundage basis, overall extruded film volumes
were up 21.5% year-over-year. Although revenues continued to
be impacted by competitive pressures, resin costs came off a market
bottom, reached earlier this year, bringing product pricing more in
line with 2019 levels. As Imaflex has no long term customer
contracts, it is able to adjust product pricing in accordance with
resin input costs, although there is usually a 30-day lag between a
resin price increase and when customer pricing can be
revised.
For the nine months ended September 30,
2020, revenues came in at $64.7
million versus $62.3 million
in the corresponding prior-year period. The increase was
largely due to the same variables outlined for the quarter,
partially offset by the lower resin pricing environment seen in the
first half of 2020.
Gross Profit
The quarterly gross profit
continued to trend well above prior-year levels, coming in at
$4.4 million or 19.1% of sales as
compared to $2.5 million and 13.1% of
sales in 2019. The improvement was largely driven by the
greater sales volumes for the current quarter, which diminished the
impact of labor and overhead costs relative to sales; and
heightened control of the Corporation's variable production
costs.
The year-to-date gross profit was $12.1
million, up 45.2% from $8.3
million in 2019. The increase was due to the same
factors outlined for the quarter, along with favourable
fluctuations in foreign exchange.
Operating Expenses
Selling and administrative
expenses were $1.9 million for the
third quarter of 2020, versus $1.8
million in the prior year. As a result of the higher
revenue base this quarter, selling and administrative expenses as a
percent of sales were down year-over-year, coming in at 8.4% for
the current quarter versus 9.4% in 2019. For the
year-to-date, selling and administrative expenses were $5.7 million or 8.8% of sales, up slightly from
$5.4 million and 8.6%, respectively
in the prior year. The increase in year-over-year expenses
for both the quarter and nine-months was largely due to higher
sales commissions resulting from the better sales volumes.
Due to the depreciation of the US dollar against the Canadian
dollar, Imaflex recorded a foreign exchange loss of $0.4 million in the third quarter of 2020,
compared to a gain of $0.2 million in
2019. This resulted in an unfavourable variance of
$0.6 million versus the third quarter
of 2019. Conversely, for the first nine months of 2020,
Imaflex realized a foreign exchange gain of $0.4 million, versus a loss of $0.5 million in 2019, culminating in a favourable
year-over-year variance of $0.9
million. A majority of the Corporation's foreign
exchange gains and losses are non-cash impacting and largely relate
to intercompany balances for which Imaflex can control the time of
settlement.
Net Income and EBITDA
Net income stood at
$1.2 million for the current quarter,
up 163.0% from $0.5 million in
2019. The year-over-year improvement was largely due to the
higher gross profit for the current quarter, partially offset by
the foreign exchange losses and greater selling and administrative
expenses. For 2020 year-to-date, net income was $4.7 million, up 278.8% from $1.2 million in the prior year. The
increase over 2019 was driven by the higher gross profit and
foreign exchange gain (versus a loss in 2019), partially offset by
higher selling and administrative expenses.
EBITDA stood at $3.0 million or
12.9% of sales for the current quarter, up materially from
$1.7 million and 9.0% of sales in the
third quarter of 2019. On a constant currency basis, the
quarterly EBITDA stood at $3.4
million or 14.8% of sales, up 123.1% from $1.5 million and 7.9% of sales in 2019. For
the first nine months of 2020, EBITDA came in at $9.5 million or 14.7% of sales, up from
$4.8 million and 7.7% of sales in the
corresponding prior-year period. Excluding the impact of
foreign exchange, EBITDA was $9.1
million (14.1% of sales) for the first nine months of 2020,
up 71.7% from $5.3 million (8.5% of
sales) in 2019.
Liquidity and Capital Resources
Net cash generated by
operating activities was $4.1 million
for the third quarter of 2020, up materially from $1.4 million in 2019. The increase was
largely driven by the higher current quarter profit, non-cash
year-over-year movements in foreign exchange and income tax
expenses, along with changes in working capital.
For 2020 year-to-date, net cash generated by operating
activities stood at $9.8 million, up
$2.8 million from $7.0 million in 2019. The increase was
driven by the higher profitability in 2020 and non-cash movements
in income tax expense, partially offset by non-cash movements in
foreign exchange and changes in working capital.
Strong cash flow generation and disciplined capital allocation
continued to strengthen the balance sheet. As at September 30, 2020, Imaflex had access to
$14.3 million of cash for operating
activities, comprised of $2.3 million
of cash, along with the full $12.0
million available under its revolving line of credit.
ADVASEAL® Update
As previously announced the
Corporation is conducting a Release Study, which is the last and
most comprehensive trial required prior to submitting the U.S.
Environmental Protection Agency (EPA) registration package.
The study determines the exact timing for release of each active
ingredient (herbicide, nematicide and fungicides) coated on the new
ADVASEAL®. This is required to show compliance with the
pre-harvest interval legally established by the EPA, which is
essentially the wait time required between the application of crop
protection products onto the soil and when a crop can be harvested
for safe human consumption. Imaflex will announce the
independent trial results once available. The Corporation
remains focused on submitting the registration package with the EPA
around year-end 2020. Once submitted, the EPA review process
can take up to a year to complete.
Impact of COVID-19 – All plants remain fully operational and
running at normal levels
COVID-19 continues to have no
significant impact on operations, nor is the Corporation
experiencing any material issues with customer receivables or
delays with suppliers and distribution channels. Imaflex is
considered an essential vendor due to the important role its
products play in protecting and preserving the integrity of
products, particularly within the food and packaging industry.
All plants remain fully operational and running at normal
business levels, while no material capital project has been halted.
Each plant has the ability to take on more volume should it
be required due to business interruption at another location or
heightened order flow. The Corporation is monitoring
developments closely and taking strong preventative measures to
protect its employees, customers and business.
Outlook
"Looking ahead, the impact of COVID-19
on our business, financial situation and results remains unclear
and cannot be predicted," said Mr. Abbandonato. "Any outbreak
at one of our plants, deferrals in purchases, payment issues with
customers, or supply and distribution delays could impact us.
However, these risks are considered temporary and with a strong
balance sheet and dynamic team the Corporation is well positioned
to meet any challenges."
"Operationally, we are beginning to see the anticipated growth
and increased profitability resulting from our recent equipment
purchases. Although we continue to be in a competitive
pricing environment, we expect business fundamentals to remain
robust for the remainder of the year and we are cautiously
optimistic fourth quarter 2020 revenues and profitability will
surpass 2019 levels."
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.