06:52:50 EDT Thu 28 Mar 2024
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Big Rock Brewery Inc
Symbol BR
Shares Issued 6,981,628
Close 2018-03-08 C$ 5.29
Market Cap C$ 36,932,812
Recent Sedar Documents

Big Rock Brewery loses $1.02-million in 2017

2018-03-08 19:44 ET - News Release

Mr. Wayne Arsenault reports

BIG ROCK BREWERY INC. ANNOUNCES 2017 FINANCIAL RESULTS AND DATE OF ANNUAL MEETING

Big Rock Brewery Inc. has released its financial results for the three months and year ended Dec. 30, 2017.

"Big Rock grew production volumes by 5 per cent and net revenue by 8 per cent in 2017," said chief executive officer Wayne Arsenault. "Although our annual operating results were negatively impacted by the provincial markup and grant structure implemented by the Alberta government late in 2016, our net markup rate (markup less grant) improved in the fourth quarter due to steps we have taken to optimize our Alberta sales volumes to the current grant structure. We expect this improvement to continue until the semi-annual remeasurement of the Alberta grant rate at the end of July, 2018. In Ontario, Big Rock beer products are now available in the Liquor Control Board of Ontario retail stores, the Beer Store outlets and licensed grocery chains, and sales more than doubled with the addition of the Etobicoke brewery in the fall of 2016 and the Liberty Commons at Big Rock Brewery restaurant in early 2017. Sales declined in British Columbia, due to our efforts to improve margins by de-emphasizing value-priced products and ever-increasing competition in that province."

Financial highlights

For the three months ended Dec. 30, 2017, compared with the fourth quarter of 2016, Big Rock:

  • Increased sales volumes by 0.4 per cent, from 46,993 hectolitres to 47,165 hectolitres;
  • Increased net revenue by 6 per cent, from $10,439,000 to $11,089,000;
  • Reported operating income of $33,000, compared with an operating loss of $220,000;
  • Reduced its net loss to $141,000 from $287,000;
  • Provided cash from operating activities of $3,005,000, compared with cash used in operating activities of $42,000;
  • Reduced debt to $3,881,000.

For the year ended Dec. 30, 2017, compared with 2016, the corporation:

  • Increased sales volumes by 5 per cent, from 199,454 hectolitres to 209,420 hectolitres;
  • Increased net revenue by 8 per cent, from $43,126,000 to $46,573,000;
  • Reported an operating loss of $1,037,000, compared with an operating loss of $266,000;
  • Reported a net loss of $1.02-million compared with a net loss of $453,000;
  • Provided cash from operating activities of $1,414,000 compared with cash provided from operating activities of $3,543,000;
  • Reduced debt by $2,434,000.

Operating highlights

Big Rock's operating results for the year ended Dec. 30, 2017, were impacted by the Alberta government's revision to the markup and grant structure that were implemented in the latter part of 2016. Under this revised structure, the maximum grant rate available to producers is based on an optimal annual sales level of 150,000 hl in Alberta. Big Rock's Alberta sales volumes exceed this threshold, which resulted in higher net costs per hl compared with the costs per hl imposed by the markup program that was in place during the first three quarters of 2016.

To improve Big Rock's grant rate going forward, the corporation took steps to optimize its Alberta sales volumes and profit margins by discontinuing two lower-margin products in 2017, reducing the number of limited-time offer price discounts presented to customers, and implementing price increases on value-priced and private label products in Alberta in the fourth quarter of 2017. As a result, Big Rock's net markup rate (markup less grant) and profit margins improved during the last quarter of 2017. Big Rock expects the grant rate improvement to continue until the end of July, 2018, at which time the grant rate will be reset, based on the existing Alberta small brewers development grant policy. In December, 2017, the Alberta government announced a decrease to its markup rate for self-distributed cider products, which is expected to have a positive impact on the corporation's 2018 results. Big Rock continues to work with the Alberta government with the objective of improving the environment for growth beyond 150,000 hl in the province. Big Rock increased production volumes and net revenue for the three months and year ended Dec. 30, 2017. Growth also occurred in the Ontario market, where sales have more than doubled compared with the same period in 2016, due mainly to the opening of the Etobicoke brewery in the fall of 2016. Big Rock beer products are now available in all three key retail channels in Ontario: the Liquor Control Board of Ontario retail stores, the Beer Store outlets and licensed grocery chains.

Although the pace of growth in Alberta during 2017 has been tempered considerably by the previously mentioned discontinuance of two low-margin products, sales of Alberta Genuine Draft (AGD), Big Rock's most approachable lager, and Big Rock-branded products continued to increase in Alberta during the fourth quarter.

Big Rock-packaged product sales increased during 2017, particularly in Alberta. These increases were led by AGD and private label brands, the limited-edition Canada 150 variety pack, the fall edition variety packs, and popular brands such as Pilsner and Rhine Stone Cowboy. Packaged product increases were partially offset by decreases in keg sales due to the general decline in keg sales in the industry and the proliferation of new craft breweries in Alberta, which tend to sell exclusively in keg format in their initial stages. Similar trends were seen in the corporation's private label business, where new packaged products contributed to increased sales, but on-premise keg sales declined.

Growth in 2017 was partially offset by a reduction in sales of Big Rock products in British Columbia. The decline is partly due to a conscious effort to improve margins by de-emphasizing value-priced products, but also reflects the effect of ever-increasing competition due to the cumulative expansion in the number of breweries and products in the province all vying for a comparatively stagnant number of listings offered through the government and retail channels.

                                        SUMMARY OF RESULTS
                         ($000, except hl, per hl and per-share amounts)

                                                Three months ended Dec. 30,          12 months ended Dec. 30,
                                                     2017             2016             2017             2016

Sales volumes (hl)                                 47,165           46,993          209,420          199,454
Net revenue                                       $11,089          $10,439          $46,573          $43,126
Operating profit (loss)                                33             (220)          (1,037)            (266)
Net income (loss)                                    (141)            (287)          (1,020)            (453)
Net income (loss) per share                         (0.02)           (0.04)           (0.15)           (0.07)
$ per hl
                                                 --------         --------         --------         --------
Net revenue                                        235.11           222.14           222.39           216.22
Cost of sales                                      146.95           137.59           132.16           122.72
                                                 --------         --------         --------         --------

Additional information

The audited annual consolidated financial statements and management's discussion and analysis for the three months and year ended Dec. 30, 2017, dated March 8, 2018, can be viewed on Big Rock's website and on SEDAR under Big Rock Brewery Inc.

Big Rock is also pleased to announce that the annual meeting of Big Rock shareholders will be held on May 10, 2018, at 2 p.m. Mountain Standard Time at the Big Rock Brewery, 5555 76 Ave. Southeast, Calgary, Alta. In accordance with Big Rock's advance notice bylaw, the board of directors has set 5 p.m. Mountain Standard Time on March 23, 2018, as the deadline for receiving any nominations.

About Big Rock Brewery Inc.

In 1985, Ed McNally founded Big Rock to buck the time's beer trends. Three bold, European-inspired offerings -- bitter, porter and traditional ale -- forged an industry at a time heavy on easy drinking lagers and light on flavour. Today, its 10 signature beers, continuing seasonal offerings, four ciders (Rock Creek Cider series) and custom-crafted private label products keep it at the forefront of the craft beer revolution, still proudly bucking the time's beer trends. Big Rock brews in Calgary, Alta., Vancouver, B.C., and Toronto, Ont.

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