TICKER SYMBOL: IFX
MONTREAL, Nov. 27, 2014 /CNW Telbec/ - Imaflex Inc.
(TSXV: IFX) announces results for the quarter ended
September 30, 2014.
(unaudited)
(CDN $ thousands,
except per share amounts)
|
Q3 2014
|
Q3 2013
|
YTD 2014
|
YTD 2013
|
Sales
|
15,314
|
15,203
|
45,004
|
42,186
|
Cost of sales
(excluding amortization)
|
13,754
|
13,315
|
40,095
|
36,709
|
Gross profit ($)
(before amortization)
|
1,560
|
1,888
|
4,909
|
5,477
|
Gross profit
(%)(before amortization)
|
10.2%
|
12.4%
|
10.9%
|
13.0%
|
Amortization of
production equipment
|
307
|
287
|
926
|
825
|
Gross
Profit
|
1,253
|
1,601
|
3,983
|
4,652
|
Gross profit
(%)
|
8.2%
|
10.5%
|
8.9%
|
11.0%
|
Expenses
|
1,493
|
1,467
|
4,409
|
4,154
|
FX loss
(gain)
|
(561)
|
230
|
(490)
|
(227)
|
Profit (loss) before
income taxes
|
321
|
(96)
|
64
|
725
|
Provision for income
taxes
|
147
|
139
|
302
|
334
|
Profit
(loss)
|
174
|
(235)
|
(238)
|
391
|
Basic and diluted
earnings (loss) per share
|
0.004
|
(0.005)
|
(0.005)
|
0.009
|
EBITDA
|
790
|
326
|
1,450
|
1,935
|
The results include those of Imaflex Inc. ("Imaflex") located in
Montréal (Québec), its divisions Canguard Packaging ("Canguard")
and Canslit ("Canslit") located in Victoriaville (Québec), and its wholly owned
subsidiary, Imaflex USA Inc.
("Imaflex USA") located in
Thomasville (North Carolina).
Sales
Sales increased by $ 111,000 in the third quarter of 2014
compared to 2013, which is a marked improvement considering that,
in addition to the planned shutdown of the Canadian operations, the
US operations shut down for their Independence Day for a longer period in 2014 than
in 2013. The main factors that positively impacted the average
sales price in 2014 included several increases in resin prices from
2013 to 2014, a higher exchange rate used to convert USD to CAD
throughout the quarter as well as a more favourable sales mix. For
certain products, volumes were sacrificed in order to focus on the
efficiency of the operations and more profitable products.
Over the nine-month period, sales increased by $ 2,818,000
or 6.7% in 2014 compared to 2013. This increase is mainly explained
by the higher average selling price of film and the appreciation of
the USD against the CAD over the nine-month period as well as
increased volumes of packaging film sales in the first quarter of
2014. The longer plant shutdown in the US as well as the decrease
in sales of mulch film in the first quarter of 2014 negatively
impacted sales over the nine-month period.
Gross profit margin
The $ 348,000 decrease in gross profit in the third quarter
of 2014 compared to 2013 is mainly explained by the lower
profitability in the US operations, which despite maintaining a
similar cost structure, suffered a decrease in sales. This
situation results from management's focus on operational efficiency
in order to prepare the ground for future increased volumes. The
Company's Canadian operations were negatively impacted by the
stronger USD, resulting in a decrease in the gross profit as a
percentage of sales, from 10.5% in the third quarter of 2013 to
8.2% in 2014.
Over the nine-month period, the gross profit decreased by
$ 669,000 and the gross profit margin decreased from 11.0% in
2013 to 8.9% in 2014. This is mainly explained by the performance
in the first and third quarters of 2014, where the Company was
faced with different, yet equally difficult situations. The first
quarter was mainly impacted by a lower sales volume of mulch film
due to difficult weather in the Southeastern United States. In the third
quarter of 2014, the Company's U.S. operations strategically
decreased sales volumes in order to gain operational efficiencies.
Over the nine-month period, the Company also faced increased raw
material costs due to resin price increases and an appreciation of
the USD against the CAD. If sales volumes progress as expected in
the US operations, management expects that the growth in
profitability will follow.
Selling and administrative
Selling and administrative expenses remained fairly stable in
the third quarter of 2014 compared to 2013, increasing from
$ 1,315,000 to $ 1,327,000 and from 8.6% of sales in 2013
to 8.7% of sales in 2014. Given the Company's cost structure was
not modified from the second half of 2013 to the third quarter of
2014, selling and administrative expenses were expected to remain
fairly constant. Higher sales and the stronger USD also contributed
to the increase in certain expenses. Unless product development
requires important additional investments, management does not
expect to add significant fixed costs in 2014.
Over the nine-month period, selling and administrative expenses
increased by $ 236,000 in 2014 compared to 2013, mainly due to
the development of the proprietary product requiring an additional
position in management, which was created midway in 2013, as well
as the increased sales and the stronger USD. As a percentage of
sales however, selling and administrative expenses remained
constant at 8.8% because the sales growth required additional
resources and costs. Management believes the Company now has the
proper structure to support growth as well as research and
development efforts.
Net income
The net income in the third quarter increased in 2014 compared
to 2013, from a loss of $ 235,000 to a profit of
$ 174,000. The increase is mainly attributable to the
important foreign exchange gain realized during the third quarter
of 2014 compared to the foreign exchange loss in the third quarter
of 2013, which more than offset the other items which negatively
impacted profitability.
Over the nine-month period, the net income of $ 391,000 in
2013 decreased to a loss of $ 238,000 in 2014. This is mainly
due to the lower gross profit, the increase in selling and
administrative expenses and finance costs, which was only partially
offset by the larger foreign exchange gain and the lower income tax
expense. The Company suffered lower-than-expected mulch film sales
early in 2014 as well as higher raw material costs throughout the
period. The US operations generated less profitability,
particularly in the third quarter of 2014, in order to focus on
preparing for increased production that is expected to materialize
in 2015. Management believes that the profitability that was
sacrificed and the costs that were added to the operations will
ultimately lead to the products that will be the drivers of growth
and profitability in future years.
Capital Resources
The Company has an operating line of credit with its bankers to
a maximum of $ 8,500,000 bearing interest at a rate of prime
plus 1.25%. The line of credit is secured by trade receivables and
inventories. As at September 30, 2014, the Company had drawn
$ 8,065,410 on its line of credit ($ 7,438,682 as at
December 31, 2013). The Company's
working capital was $ 1,998,965 as at September 30, 2014 compared to $ 143,234 as
at December 31, 2013, mainly because
the long term borrowings were classified as current and
non-current. During the first quarter of 2014, Imaflex refinanced a
long term loan in order to replenish working capital and settled
the balance of purchase price on the business acquisition. The
Company also completed a financing in October of 2014 in order to
strengthen its working capital position following the growth in
sales and the investments in equipment over the year. Based on the
Company's current situation, management does not anticipate
liquidity problems.
Management Outlook
Though not yet visible in this quarter's results, due to our
legacy business absorbing the increased costs required in laying
the foundations to realize significant revenue and profitability
increases in the near future, management is pleased to report that
we are at the point where all production entities should soon begin
to contribute to profitability.
Our recent press releases, stating how our research and
development team has managed to find efficient and productive ways
to recycle paint waste and innovative solutions for important
problems currently affecting the citrus industry, confirm the
future growth potential we have created. Management now feels that
the combination of reduced costs with increases in revenues in our
legacy business should soon generate improvements to our bottom
line.
Safe Harbor Statement
Certain statements and information included in this release
constitute "forward-looking statements". Such forward-looking
statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or
achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied in
such forward-looking statements. Additional discussion of
factors that could cause actual results to differ materially from
management's projections, estimates and expectations is contained
in the Company's other public filings. Unless otherwise
required by the securities authorities, we do not undertake to
update any forward-looking statements that may be made from time to
time by us or on our behalf.
Non-IFRS Measure
The Company's management uses a non-IFRS measure in this press
release, namely EBITDA. Management wishes to specify that in
the performance of the Company's financial results, EBITDA is
calculated as "Earnings before finance expenses, taxes, the change
in fair value of the derivative financial instrument, depreciation
and amortization". While EBITDA is not a standard 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.
The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this release.
SOURCE Imaflex Inc.