Benefits of scale and enhanced capabilities
continue to drive growth
Q3 2021 Highlights
- Revenues of $29.5 million, up
28.6% over $22.9 million in
2020
- Net income of $2.8 million
($0.05 per share1),
versus $1.2 million ($0.02 per share1) in prior
year
- Generated free cash flow2 of $3.2 million ($3.5
million in 2020); closed quarter with $8.1 million of cash ($0.16 per share1)
MONTREAL, Nov. 24, 2021 /CNW Telbec/ - Imaflex Inc.
("Imaflex" or the "Corporation") (TSXV: IFX) reports strong
consolidated financial results for the third quarter (Q3) ended
September 30, 2021 and provides a
business update. All amounts are in Canadian dollars.
"We had another solid quarter driven by our diversified set of
offerings and increased scale," highlighted Mr. Joe Abbandonato, President and Chief Executive
Officer of Imaflex. "Earnings per share for 2021 year-to-date
are already at par with full year 2020 and although market forces
remain challenging, we are well poised to close the year with a
respectable finish."
Consolidated Financial Highlights (unaudited)
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
CDN $ thousands,
except per share amounts
(or otherwise indicated)
|
2021
|
2020
|
% Change
|
2021
|
2020
|
% Change
|
Revenues
|
29,459
|
22,904
|
28.6%
|
81,770
|
64,742
|
26.3%
|
Gross
Profit
|
4,396
|
4,385
|
0.3%
|
13,498
|
12,055
|
12.0%
|
Selling & admin.
expenses
|
1,806
|
1,923
|
(6.1)%
|
5,267
|
5,697
|
(7.5)%
|
Foreign exchange
(gains) losses
|
(580)
|
434
|
(233.6)%
|
97
|
(432)
|
(122.5)%
|
Net income
|
2,774
|
1,236
|
124.4%
|
6,725
|
4,670
|
44.0 %
|
Basic EPS
|
0.05
|
0.02
|
150.0%
|
0.13
|
0.09
|
44.4%
|
Diluted
EPS
|
0.05
|
0.02
|
150.0%
|
0.13
|
0.09
|
44.4%
|
Gross
margin
|
14.9%
|
19.1%
|
(4.2)
pp
|
16.5%
|
18.6%
|
(2.1)
pp
|
Selling & admin.
expenses as % of revenues
|
6.1%
|
8.4%
|
(2.3)
pp
|
6.4%
|
8.8%
|
(2.4)
pp
|
EBITDA[2] (Excluding FX)
|
3,490
|
3,387
|
3.0%
|
10,897
|
9,110
|
19.6%
|
EBITDA
|
4,070
|
2,953
|
37.8%
|
10,800
|
9,542
|
13.2%
|
EBITDA
margin
|
13.8%
|
12.9%
|
0.9
pp
|
13.2%
|
14.7%
|
(1.5)
pp
|
______________
|
1
|
Basic and diluted
earnings per share (EPS)
|
2
|
EBITDA: Earnings
Before Interest, Taxes, Depreciation, and Amortization and Free
Cash Flow (net cash generated by operating activities less net
cash used in investing activities). See "Caution Regarding
non-IFRS Financial Measures" which follows.
|
Financial Review: Quarter Ended September 30
Revenues
Revenues
were $29.5 million for the current
quarter, up 28.6% over 2020. Growth was driven by product
pricing, which rose in-line with higher year-over-year resin costs,
partially offset by unfavourable movements in foreign
exchange. Sales volumes for higher margin converted products
were up materially, while garbage bag sales also continued to climb
as more employees returned to the workplace following the continued
phase-out of COVID related restrictions.
For the first nine months of 2021 revenues came in at
$81.8 million, up 26.3% over
2020. The year-over-year increase was driven by product
pricing and higher sales volumes, partially offset by unfavourable
movements in foreign exchange. Sales volumes for converted
products and garbage bags were up significantly over 2020.
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.
This can temporarily impact margins, particularly in a rising raw
material pricing environment.
Gross Profit
Gross profit for the third quarter
of 2021 came in at $4.4 million,
unchanged from the corresponding prior year quarter. The
gross margin stood at 14.9% for the current quarter, down from
19.1% in 2020. For the first nine months of 2021, the gross
profit was $13.5 million (16.5% of
sales), up 12% from $12.1 million
(18.6% of sales) in 2020.
Imaflex's 2021 profit margins remained healthy for the current
quarter and year-to-date, due to higher sales volumes for converted
products and garbage bags. The Corporation also continued to
benefit from its growing scale, whereby incremental revenues lessen
the impact of labor and overhead costs relative to sales.
This said, margins were impacted by the rapid rise in resin input
costs, which resulted in a higher revenue base due to associated
increases in product pricing. In addition, foreign exchange
fluctuations were unfavourable year-over-year.
Operating Expenses
Selling and Administrative expenses
(SG&A), came in at $1.8 million
(6.1% of sales) for the quarter, versus
$1.9 million (8.4% of sales) in the
prior year. For the first nine months of 2021, they totaled
$5.3 million (6.4% of sales), down
from $5.7 million (8.8% of sales) in
2020. The higher revenue base for the current quarter and
year-to-date, along with ongoing cost controls, reduced the impact
of SG&A expenses as a percent of sales in 2021.
Due to the appreciation of the US dollar against the Canadian
dollar, Imaflex recorded a foreign exchange gain of $0.6 million in the third quarter of 2021, versus
a loss of $0.4 million in 2020,
resulting in a $1.0 million
favourable year-over-year variance. For 2021 year-to-date,
Imaflex had a foreign exchange loss of $0.1
million, versus a gain of $0.4
million in 2020, resulting in a $0.5
million unfavourable year-over-year variance. 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
$2.8 million for the current quarter,
up 124.4% from $1.2 million in
2020. The increase was largely due to lower selling and
administrative expenses and the foreign exchange gain in
2021. For the first nine months of 2021 net income came in at
$6.7 million, up 44% over 2020.
The increase was largely due to the higher gross profit, along with
lower selling and administrative and finance expenses, partially
offset by unfavourable year-over-year movements in foreign
exchange.
EBITDA was $4.1 million or 13.8%
of sales for the current quarter, up from $3.0 million and 12.9% of sales in 2020. On
a constant currency basis, EBITDA came in at $3.5 million (11.8% of sales) for the third
quarter of 2021, compared to $3.4
million (14.8% of sales) in 2020.
For the first nine months of 2021, EBITDA came in at
$10.8 million (13.2% of sales),
versus $9.5 million (14.7% of sales)
in the corresponding prior-year period. Excluding the impact
of foreign exchange, EBITDA came in at $10.9
million (13.3% of sales) for 2021 year-to-date, up 19.6%
from $9.1 million (14.1% of sales) in
2020. The EBITDA margin for 2021 was impacted by the higher
revenue base, which rose in part due to product pricing adjustments
resulting from higher resin input costs.
Liquidity and Capital Resources
Net cash generated by
operating activities before movements in working capital and taxes
paid was $3.5 million for the third
quarter of 2021, up slightly from $3.4
million in 2020. Including movements in working
capital and taxes paid, net cash generated by operating activities
came in at $3.6 million, versus
$4.1 million in 2020. The
decrease was largely driven by movements in trade & other
payables.
For the first nine months of 2021, cash flows generated by
operating activities, before movements in working capital and taxes
paid, stood at $10.8 million, up from
$9.1 million in the corresponding
prior-year period. The year-over-year increase was driven by
the higher profit in 2021. Including movements in working
capital and taxes paid, net cash generated by operating activities
stood at $6.6 million for 2021
year-to-date, down from $9.8 million
in 2020. The decrease was largely driven by movements in
trade & other receivables resulting from higher product pricing
and stronger sales volumes in 2021. Inventory levels also
fluctuated versus 2020, reflecting higher resin input costs and
additional raw material purchases to accommodate
stronger customer orders and ensure resin inventory in a tight
market.
As at September 30, 2021, Imaflex
had approximately $18.2 million of
cash available for operating activities, including a cash balance
of $8.1 million ($3.2 million as at December 31, 2020) and another $10.1 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 ingredient
("active ingredients" or "TGAI"3) registration package
to the EPA. As previously mentioned, the Corporation has one
remaining step. Four of the five active ingredients used on the
film 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. Although the lab has made significant progress, the
analysis is taking longer than originally anticipated and we are
now targeting completion for around year-end 2021. This said,
it is a highly complex process and the exact timing for completion
is subject to change.
____________
|
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
"Demand for our products continues to be
steady, particularly our higher margin offerings," highlighted Mr.
Abbandonato. "As well, we continue to benefit from our
growing scale, enhanced by our multi-year capital
investments. This said, we operate in a competitive pricing
environment, and although resin input costs appear to be
stabilizing, any new supply constraints could put additional
pressure on resin pricing and availability. Fortunately, we
are normally able to adjust product pricing in accordance with raw
material costs. In addition, our diversified set of offerings
and broad customer base helps mitigate business
risks."
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 non-IFRS measures in this press release,
namely EBITDA (Earnings Before Interest, Taxes, Depreciation, and
Amortization), EBITDA excluding foreign exchange and Free Cash
Flow.
While EBITDA and Free Cash Flow are not standard International
Financial Reporting Standards (IFRS) measures, management,
analysts, investors and others use them 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 and
Free Cash Flow may be different from those used by other companies
and accordingly they 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.