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Lassonde Industries Inc
Symbol C : LAS.A
Shares Issued 3,235,300
Close 2018-08-10 C$ 265.00
Recent Sedar Documents

Lassonde Industries earns $18.8-million in Q2 2018

2018-08-10 12:40 ET - News Release

Mr. Pierre-Paul Lassonde reports

LASSONDE INDUSTRIES INC. ANNOUNCES ITS Q2 2018 RESULTS

Lassonde Industries Inc. posted sales of $390.9-million in the second quarter of 2018, of which $12.4-million came from the recently acquired Old Orchard Brands LLC (OOB). Excluding OOB's sales and a $9.5-million unfavourable foreign exchange impact, adjusted sales were up 1.2 per cent year over year. Second quarter profit attributable to the company's shareholders totalled $18.1-million. Excluding a $1.2-million impact from the OOB acquisition and an after-tax $600,000 gain on capital assets recognized in 2017, the 2018 second quarter profit attributable to the company's shareholders was up $300,000 year over year.

                    FINANCIAL HIGHLIGHTS    
                 (in thousands of dollars)  

                                         Second quarter ended 
                                        June 30,       July 1, 
                                           2018          2017

Sales                               $   390,854   $   383,335
Operating profit                         28,042        33,437
Profit before income taxes               24,754        30,417
Profit attributable to 
the Company's shareholders               18,087        19,606
Basic and diluted earnings 
per share (in $)                    $      2.59   $      2.81

Note: These are financial highlights only. The management
discussion and analysis, the unaudited interim condensed 
consolidated financial statements, and the notes thereto 
for the quarter ended June 30, 2018, are available on 
SEDAR com and on the website of Lassonde Industries.

"Our second quarter sales met expectations while operating profit was affected by inflationary pressures on the input and transportation costs of our U.S. operations. The company responded with certain price adjustments, but their effectiveness has been delayed as advance notice is normally given to customers. We are also facing a difficult competitive environment in the United States. I would like to thank all the employees and builders of years past, who knew how to hold fast to their values, and those of today, who ensure those values live on. If the vegetable canning business founded in Rougemont a hundred years ago by my grandparents has become a North American leader, it's because we have been able to look to the future while staying true to our roots," said Pierre-Paul Lassonde, chairman of the board and chief executive officer of Lassonde Industries.

Financial results

On May 31, 2018, the company completed the acquisition of OOB for a total cash consideration of $148.9-million, which was paid at the close of the transaction. This amount includes $2.9-million (U.S.) in preliminary working capital adjustments and is subject to potential additional working capital and other adjustments. A contingent consideration of up to $10-million (U.S.) may be payable over the next two years subject to specified financial milestones based on adjusted EBITDA. In addition, Lassonde will finalize the purchase of the plant and land for $4-million (U.S.) subject to satisfaction of certain regulatory conditions. At the close of the transaction, an amount of $152.1-million (U.S.) was paid to settle the OOB acquisition cost and related charges. The company recognized this business combination using the acquisition method in accordance with the provisions of IFRS 3 (international financial reporting standards). Therefore, the unaudited interim condensed consolidated financial statements for the second quarter of 2018 include the results of OOB from May 31, 2018, to June 30, 2018, and certain transaction fees related to the acquisition. Note 6 to the unaudited interim condensed consolidated financial statements for the second quarter of 2018 contains additional information about the acquisition, including information on the acquisition financing and related costs.

For the second quarter of 2018, the company's sales totalled $390.9-million, up $7.6-million, or 2 per cent, from $383.3-million in the second quarter of 2017. Sales from OOB added $12.4-million to the company's second quarter sales. Excluding OOB's sales and a $9.5-million unfavourable foreign exchange impact, the company's second quarter sales increased by $4.7-million (1.2 per cent) year over year, largely due to sales price fluctuations that had a favourable impact on national brand sales. For the first six months of 2018, sales totalled $748.6-million, down 0.7 per cent from $754.1-million in the first six months of 2017.

The company's operating profit for the second quarter of 2018 totalled $28-million, down $5.4-million from $33.4-million in the same quarter last year. During the second quarter of 2018, the company incurred $1.5-million in expenses related to the OOB acquisition. As for OOB, it posted $200,000 in operating profit despite an $800,000 expense as inventory was stepped up as part of the allocation of the acquisition purchase price. Excluding the impacts of the OOB acquisition and of a $600,000 gain on capital assets recognized in 2017, the company's second quarter operating profit was down $3.5-million year over year. This decrease came mainly from a lower contribution margin realized by U.S. operations resulting from higher input costs and from transportation costs exceeding the price adjustments made during the quarter, partly offset by lower performance-related salary expenses. Operating profit for the first six months of 2018 totalled $50.4-million, down $6.7-million from $57.1-million in the first six months of 2017.

The company's financial expenses went from $3.1-million in the second quarter of 2017 to $3.3-million in the second quarter of 2018. Excluding $600,000 in interest expense related to the financing of the OOB acquisition, financial expenses were down $400,000. This decrease came mainly from a $300,000 decrease in the amortization of transaction costs. For the six-month periods, financial expenses went from $6.4-million in 2017 to $5.5-million in 2018.

Other (gains) losses went from a $100,000 gain in the second quarter of 2017 to a less than $100,000 gain in the second quarter of 2018. These gains were essentially due to foreign exchange gains. For the six-month periods, the "other (gains) losses" item was a gain of less than $100,000 in 2018, compared with a loss of less than $100,000 in 2017.

Profit before income taxes stood at $24.8-million in the second quarter of 2018, down $5.6-million from $30.4-million in the second quarter of 2017. For the first six months of 2018, profit before income taxes stood at $44.9-million, down $5.8-million from $50.7-million in the first six months of 2017.

Income tax expense went from $9.7-million in the second quarter of 2017 to $6-million in the second quarter of 2018. At 24.1 per cent, the 2018 second quarter effective income tax rate was lower than the 32-per-cent rate in the same quarter of 2017. This lower effective income tax rate mainly reflects the impact of a reduced tax rate following the U.S. tax reform adopted in December, 2017. Income tax expense for the first six months of 2018 stood at $11.2-million, down $4.8-million from $16-million in the first six months of 2017.

The 2018 second quarter profit totalled $18.8-million, down $1.9-million from $20.7-million in the second quarter of 2017. It should be noted that the current quarter's results include $1.1-million, net of tax, in OOB acquisition-related costs, $400,000, net of tax, in additional financial expenses related to the financing of the acquisition, and a profit of $100,000 from OOB. For the first six months of 2018, profit totalled $33.6-million versus profit of $34.6-million in the first six months of 2017.

The 2018 second quarter profit attributable to the company's shareholders was $18.1-million, resulting in basic and diluted earnings per share of $2.59. In the second quarter of 2017, profit attributable to the company's shareholders totalled $19.6-million, resulting in basic and diluted earnings per share of $2.81. Excluding the impacts of the OOB acquisition and of the gain on capital assets recognized in 2017, the 2018 second quarter profit attributable to the company's shareholders was up $300,000 year over year. For the first six months of 2018, profit attributable to the company's shareholders totalled $32.6-million, resulting in basic and diluted earnings per share of $4.67 and, in the same six-month period of 2017, profit totalled $32.7-million, resulting in basic and diluted earnings per share of $4.68.

The company's operating activities generated $12-million in cash during the second quarter of 2018, while they generated $62-million in cash during the same quarter last year. As for OOB's operating activities, they generated $2.3-million in cash during the second quarter of 2018. Financing activities generated $175.4-million in cash during the second quarter of 2018, while they used $43.2-million in the same quarter of 2017. During the second quarter of 2018, the OOB acquisition generated $193.6-million in cash, leaving a difference of $25-million on a comparable basis. Investing activities used $199.3-million in cash during the second quarter of 2018, compared with $5-million used in the same quarter of 2017. Excluding the $191.7-million in cash flows related to the OOB acquisition, investing activities used $2.6-million more cash. At the end of the second quarter of fiscal 2018, the company reported a cash and cash equivalents balance of $300,000 and a bank overdraft of $15.3-million, whereas, at the end of the second quarter of 2017, the cash and cash equivalents balance was $6.1-million and the bank overdraft balance was $1.7-million.

Outlook

The company noted that industry volumes for the U.S. fruit juice and drinks market were stable for the 12-month period ended June 30, 2018. In the Canadian market, the situation is different as industry sales were down slightly when compared with the same period of last year. The company is seeking to limit the impact of the relative weakness in demand through national brand product innovation and continued private label customer development.

The company's sales were up 2 per cent in the second quarter of 2018 when compared with the same quarter of 2017. Excluding the foreign exchange impacts and the impact of the OOB acquisition, the adjusted increase was 1.2 per cent. Barring any significant external shocks (and excluding foreign exchange impacts and the impact of the OOB acquisition to maintain a comparable basis), the company expects that, for 2018, its consolidated annual sales growth rate will be slightly below that of 2017. It remains concerned, however, by tariff-related uncertainties and by an instability in raw materials and transportation costs in a competitive landscape that has become more difficult following an ownership change affecting its largest U.S. competitor. The company is also paying close attention to the revision of Canada's food guide and its potential impacts.

About Lassonde Industries Inc.

Lassonde is a North American leader in the development, manufacture and sale of a wide range of ready-to-drink fruit and vegetable juices and drinks marketed under brands such as Apple & Eve, Everfresh, Fairlee, Fruite, Graves, Oasis, and Rougemont.

Lassonde is also one of the two largest producers of store-brand, shelf-stable fruit juices and drinks in the United States and a major producer of cranberry sauces.

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