Another solid quarter with material growth
in sales and profitability
Q2 2021 Highlights
- Revenues of $27.4 million, up
31.6% over $20.8 million in
2020
- Gross profit of $4.5 million
(16.5% of sales), up 23.9% from $3.6
million (17.5% of sales) in 2020
- EBITDA1 was $3.3
million, up 14.5% over $2.9
million in 2020; up 36.6% on constant currency
basis
- Net income of $2.0 million
($0.04 per share2),
versus $0.3 million ($0.01 per share2) in
prior year
- Balance sheet remains strong, closed quarter with
$4.4 million of cash ($0.09 per share2)
MONTREAL, Aug. 25, 2021 /CNW Telbec/ - Imaflex Inc.
("Imaflex" or the "Corporation") (TSXV: IFX), reports strong
consolidated financial results for the second quarter (Q2) ended
June 30, 2021 and provides a business
update. All amounts are in Canadian dollars.
"Imaflex continues to generate impressive top and bottom line
growth," said Mr. Joe Abbandonato,
President and Chief Executive Officer of Imaflex. "We expect
this positive backdrop will continue to provide a strong tailwind
for us to further scale the business and we remain confident in our
ability to generate meaningful profitability and cash flows going
forward."
_______________________
|
1
|
EBITDA: Earnings
Before Interest, Taxes, Depreciation, and Amortization. See
"Caution Regarding Non-IFRS Financial Measures" which
follows.
|
2
|
Basic and diluted
earnings per share (EPS)
|
Consolidated Financial Highlights (unaudited)
|
Three months ended
June 30,
|
Six months ended June
30,
|
CDN $ thousands,
except per share amounts
(or otherwise
indicated)
|
2021
|
2020
|
% Change
|
2021
|
2020
|
% Change
|
|
|
|
|
|
|
|
Revenues
|
27,391
|
20,807
|
31.6 %
|
52,311
|
41,838
|
25.0 %
|
Gross
Profit
|
4,512
|
3,641
|
23.9 %
|
9,102
|
7,670
|
18.7 %
|
Selling & admin.
expenses
|
1,743
|
1,878
|
(7.2)%
|
3,461
|
3,774
|
(8.3)%
|
Foreign exchange
(gains) losses
|
379
|
816
|
(53.6)%
|
677
|
(866)
|
(178.2)%
|
Net income
|
1,999
|
342
|
484.5 %
|
3,951
|
3,434
|
15.1 %
|
Basic EPS
|
0.04
|
0.01
|
300.0 %
|
0.08
|
0.07
|
14.3 %
|
Diluted
EPS
|
0.04
|
0.01
|
300.0 %
|
0.08
|
0.07
|
14.3 %
|
Gross
margin
|
16.5%
|
17.5%
|
(1.0)
pp
|
17.4%
|
18.3%
|
(0.9)
pp
|
Selling & admin.
expenses as % of revenues
|
6.4%
|
9.0%
|
(2.6)
pp
|
6.6%
|
9.0%
|
(2.4)
pp
|
EBITDA (Excluding
FX)
|
3,653
|
2,675
|
36.6 %
|
7,407
|
5,723
|
29.4 %
|
EBITDA
|
3,274
|
2,859
|
14.5 %
|
6,730
|
6,589
|
2.1 %
|
EBITDA
margin
|
12.0%
|
8.9%
|
3.1
pp
|
12.9%
|
15.7%
|
(2.8)
pp
|
Financial Review: Quarter Ended June
30
Revenues
Revenues were $27.4 million for the quarter, up 31.6% over the
prior year. Growth was largely driven by product pricing,
which rose in line with higher resin prices, and heightened sales
volumes, partially offset by unfavourable movements in foreign
exchange. Sales of higher margin converted products were
particularly strong, while garbage bag sales also expanded
materially as more businesses continue to see employees return to
the workplace following the phase-out of COVID-19 related
restrictions.
For the first half of 2021 revenues came in at $52.3 million, growing 25.0% over the
corresponding prior-year period. The year-over-year
improvement was largely driven by product pricing which rose in
conjunction with the aforementioned increase in resin raw material
costs. As well, sales of converted products were up
significantly in 2021, partially offset by unfavourable movements
in foreign exchange.
As Imaflex has no long-term customer contracts, it is able to
adjust product pricing in accordance with resin input costs.
However, there is usually a 30-day lag between a resin price
increase and when customer pass-through adjustments are made, which
can temporarily impact margins particularly in a rising raw
material pricing environment.
Gross Profit
The quarterly gross profit came in
at $4.5 million or 16.5% of sales,
versus $3.6 million and 17.5% of
sales in the prior year. Profit margins remained above
historical norms for the current quarter, although they were
impacted by the rapid increase in resin input costs and
unfavourable fluctuations in foreign exchange versus the
corresponding prior-year quarter. Since early 2020, Imaflex
has maintained higher than average margins largely due to the
positive impact of scale on the business, whereby incremental
revenues lessen the impact of labour and overhead costs relative to
sales.
For 2021 year-to-date, the gross profit was also up, coming in
at $9.1 million (17.4% of sales)
versus $7.7 million (18.3% of sales)
in 2020. The year-over-year variances were largely due to the
same factors outlined for the quarter.
Operating Expenses
Selling and Administrative expenses
remained controlled, coming in at $1.7
million (6.4% of sales) for the quarter versus $1.9 million (9.0% of sales) in the prior
year. For the first half of 2021, selling and administrative
expenses came in at $3.5 million
(6.6% of sales), down 8.3% from $3.8
million (9.0% of sales) in the prior year. As a
result of the lower expenses and higher revenue base for both the
current quarter and year-to-date, selling and administrative
expenses as a percent of sales came in lower versus the
corresponding prior-year
periods.
Due to the depreciation of the US dollar against the Canadian
dollar, Imaflex recorded a foreign exchange loss of $0.4 million in the second quarter of 2021,
versus a loss of $0.8 million in
2020. For 2021 year-to-date, Imaflex had a foreign exchange
loss of $0.7 million, versus a gain
of $0.9 million in the corresponding
prior-year period. 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
$2.0 million for the current quarter,
up 484.5% from $0.3 million in
2020. The increase was largely due to the higher gross
profit, lower selling and administrative expenses and reduced
year-over-year foreign exchange losses.
For the first six months of 2021 net income came in at
$4.0 million, up 15.1% from
$3.4 million in the prior year.
The increase was largely due to the higher gross profit, along with
lower selling and administrative and finance expenses, partially
offset by the aforesaid unfavourable year-over-year movements in
foreign exchange.
EBITDA was $3.3 million or 12.0%
of sales for the current quarter, compared to $2.9 million and 8.9% of sales in 2020. On
a constant currency basis, EBITDA came in at $3.7 million (13.3% of sales), rising 36.6% over
the
$2.7 million (12.9% of sales)
achieved in the second quarter of 2020.
EBITDA stood at $6.7 million
(12.9% of sales) for the first half of 2021, versus $6.6 million (15.7% of sales) in the
corresponding prior-year period. Excluding the impact of
foreign exchange, EBITDA came in at $7.4
million (14.2% of sales), up 29.4% from $5.7 million (13.7% of sales) recorded in
2020.
Liquidity and Capital Resources
Net cash generated by
operating activities before movements in working capital and taxes
paid was $3.6 million for the second
quarter of 2021, up 36.4% from $2.6
million in 2020. The increase was due to the
heightened profitability in the current quarter. Including
cash consumed by working capital and taxes paid, net cash generated
by operating activities came in at $0.2
million, down from $3.7
million in 2020. The year-over-year decrease was
largely driven by movements in trade & other receivables
resulting from the heightened sales volumes and pricing in the
current quarter. Inventory levels also fluctuated versus
2020, reflecting additional raw material purchases in the current
quarter to accommodate stronger customer orders and ensure resin
inventory in a tight market.
For the first half of 2021, cash flows generated by operating
activities, before movements in working capital and taxes paid,
stood at $7.4 million, up
$1.7 million over the $5.7 million recorded in the corresponding
prior-year period. The increase was driven by the higher
profit in 2021 and non-cash movements in foreign exchange.
Including movements in working capital and taxes paid, net cash
generated by operating activities stood at
$3.0 million for 2021 year-to-date,
down $2.7 million from $5.7 million in 2020. The decrease was
largely due to the same factors outlined for the
quarter.
As at June 30, 2021, Imaflex had
approximately $15.4 million of cash
available for operating activities, including a cash balance of
$4.4 million ($3.2 million as at December 31, 2020) and another $10.9 million under its
$12.0 million revolving line of
credit. The Corporation is maintaining a strong balance
sheet, which significantly enhances its financial
flexibility.
ADVASEAL® Update
Imaflex remains focused
on submitting the ADVASEAL® and active ingredients
("active ingredients" or "TGAI"3) registration package
to the EPA around summer 2021. Work is progressing with the
lab and the Corporation remains focused on its timely
submission. As previously mentioned, four of the five
active ingredients used on ADVASEAL® come from
Asia and are not yet registered in
the U.S.A. To simplify their registration as generic
pesticides Imaflex has mandated a lab to prove their equivalence
with TGAIs already registered and marketed in the U.S.A.
_______________________
|
3
|
A technical grade
active ingredient ("TGAI") is used for the manufacturing of
pesticide end-use products and contains, in addition to the pure
active ingredient, minor amounts of impurities.
|
Outlook
"We continue to see demand for our products
build, particularly our higher margin converted products,"
highlighted Mr. Abbandonato. "This, together with our growing
scale and healthy cash flows, puts Imaflex in a solid position to
continue to generate sales volumes and profitability margins above
historical norms. This said, we operate in a competitive
pricing environment, exacerbated by the pace of resin price
increases in recent quarters and a tightening raw material
market. Any new resin market production constraints could
compound the situation further, putting additional pressure on
resin supplies and pricing. Fortunately, resin supply issues
have not been significant to date and since we have no long-term
contracts, the Company is normally able to pass along higher resin
raw material costs, although there is normally a one-month
lag."
To date, the impact of COVID-19 on Imaflex's business, financial
situation and results has not been material. However, any
outbreaks of new viral variants, occurrences at one of the
Corporation's plants, deferrals in customer purchases, payment
issues with customers, or supply and distribution delays could
impact performance, the extent to which cannot be predicted.
This said, these risks are considered temporary and with a strong
balance sheet and dynamic team the Corporation is well positioned
to meet any challenges ahead.
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.