Realizes sequential increase in
year-over-year profitability; COVID-19 has no material impact on
operations
Q2 2020 Highlights
- Packaging film sales volumes up approximately 18% over 2019
on a poundage basis
- Gross margin of 17.5%, versus 12.8% in prior year
- EBITDA1 of $1.9 million, up 46.3% over Q2 2019; up 63.4% on
constant currency basis
- Net income of $0.3
million or $0.01 per share, up
66.8% from $0.2 million in
2019
- Operating cash flows remain strong
MONTREAL, Aug. 25, 2020 /CNW Telbec/ - Imaflex Inc.
("Imaflex" or the "Corporation") (TSXV: IFX), announces its
consolidated financial results for the second quarter (Q2) ended
June 30, 2020 and provides a business
update. All amounts are in Canadian dollars.
"We delivered another solid quarter executing on our strategy of
providing high-value, innovative solutions to our customers, while
achieving important new milestones with ADVASEAL®, our next
generation crop protection film under
development," highlighted Mr. Joe
Abbandonato, President and Chief Executive Officer of
Imaflex. "Quarterly year-over-year profitability was up
again, while the strength of our balance sheet and cash flows also
continued to grow."
Consolidated Financial Highlights (unaudited)
|
Three months ended
June 30,
|
Six months ended June
30,
|
CDN $ thousands,
except per share amounts
(or otherwise indicated)
|
2020
|
2019
|
% Change
|
2020
|
2019
|
% Change
|
Revenues
|
20,807
|
21,269
|
(2.2)%
|
41,838
|
43,136
|
(3.0)%
|
Gross
Profit
|
3,641
|
2,712
|
34.3 %
|
7,670
|
5,784
|
32.6 %
|
Selling & admin.
expenses
|
1,878
|
1,863
|
0.8 %
|
3,774
|
3,554
|
6.2 %
|
Foreign exchange
(gains) losses
|
816
|
366
|
123.0 %
|
(866)
|
715
|
(221.1)%
|
Net income
|
342
|
205
|
66.8 %
|
3,434
|
763
|
350.1 %
|
Basic EPS
|
0.01
|
0.00
|
n/a
|
0.07
|
0.02
|
250.0 %
|
Diluted
EPS
|
0.01
|
0.00
|
n/a
|
0.07
|
0.02
|
250.0 %
|
Gross
margin
|
17.5%
|
12.8%
|
4.7
pp
|
18.3%
|
13.4%
|
4.9
pp
|
Selling & admin.
expenses as % of revenues
|
9.0%
|
8.8%
|
0.2
pp
|
9.0%
|
8.2%
|
0.8
pp
|
EBITDA (Excluding
FX)
|
2,675
|
1,637
|
63.4 %
|
5,723
|
3,789
|
51.0 %
|
EBITDA
|
1,859
|
1,271
|
46.3 %
|
6,589
|
3,074
|
114.3 %
|
EBITDA
margin
|
8.9%
|
6.0%
|
2.9
pp
|
15.7%
|
7.1%
|
8.6
pp
|
______________________________________
|
1
|
EBITDA: Earnings
Before Interest, Taxes, Depreciation, and Amortization. See
"Caution Regarding Non-IFRS Financial Measures" which
follows.
|
Financial Review: Quarter ended June
30
Revenues
Revenues were $20.8
million for the second quarter of 2020, down 2.2% from
$21.3 million in 2019. The
decrease was largely due to lower citrus film sales and product
pricing, which continued to be impacted by competitive pressures
and lower resin prices. Excluding citrus film sales, which
were nil for the current quarter versus $0.5
million in 2019, revenues were essentially flat
year-over-year. On a poundage basis, packaging film volumes
were up materially over 2019, coming in approximately 18%
higher.
For the six months ended June 30,
2020 revenues came in at $41.8
million, versus $43.1 million
in the corresponding prior-year period. The decrease was
largely due to the same variables outlined for the quarter.
Gross Profit
The quarterly gross profit was up
markedly over 2019, coming in at $3.6
million or 17.5% of sales as compared to $2.7 million and 12.8% of sales in the prior
year. The improvement was driven by heightened control of the
Corporation's variable production costs, higher sales volumes on a
poundage basis and favourable fluctuations in foreign
exchange.
Gross profit for the first half of 2020 also came in higher,
reaching $7.7 million and 18.3% of
sales, up from $5.8 million and 13.4%
of sales in the corresponding prior-year period. The
increase was due to the same factors outlined for the quarter.
Operating Expenses
Selling and administrative expenses
were $1.9 million or 9.0% of sales
for the second quarter of 2020, relatively unchanged from
$1.9 million and 8.8% of sales,
respectively in 2019. For the year-to-date, selling and
administrative expenses were $3.8
million or 9.0% of sales, up slightly from $3.6 million and 8.2%, respectively in the prior
year. The year-over-year increases were largely due to higher
sales commissions resulting from better sales volumes on a poundage
basis and other miscellaneous expenses.
Due to the depreciation of the US dollar against the Canadian
dollar, Imaflex recorded a foreign exchange loss of $0.8 million in the second quarter of 2020,
compared to a loss of $0.4 million in
2019. Conversely, for the first half of 2020 Imaflex realized
a foreign exchange gain of $0.9
million, versus a loss of $0.7
million in 2019, resulting in a favourable year-over-year
variance of $1.6 million. 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 $0.3 million for the current quarter, up 66.8%
from $0.2 million in 2019. The
year-over-year improvement was largely due to the higher gross
profit for the current quarter, partially offset by unfavourable
year-over-year movements in foreign exchange. For the first
half of 2020, net income stood at $3.4
million, up 350.1% from $0.8
million in 2019. The increase was driven by the higher
gross profit, along with favourable movements in foreign
exchange.
EBITDA was $1.9 million or 8.9% of
sales for the current quarter, up from $1.3
million and 6.0% of sales in the second quarter of
2019. On a constant currency basis, the quarterly EBITDA
stood at $2.7 million (12.9% of
sales), up 63.4% from $1.6 million
(7.7% of sales) in 2019.
For the first half of 2020, EBITDA was up 114.3% over the prior
year, coming in at $6.6 million or
15.7% of sales, versus $3.1 million
and 7.1% of sales in 2019. Excluding the impact of foreign
exchange, EBITDA was $5.7 million
(13.7% of sales), up 51.0% from $3.8
million (8.8% of sales) in the first half of 2019.
Liquidity and Capital Resources
Net cash generated by
operating activities was $3.7 million
for the second quarter of 2020, up from $2.4
million in 2019. The 50.8% increase was driven by
higher trade & other receivables due to the greater sales
volumes (pounds) this year, non-cash movements in foreign exchange
and income tax expenses, along with the higher profitability for
the current quarter.
For the first half of 2020, net cash generated by operating
activities stood at $5.7 million,
versus $5.6 million in 2019.
Excluding movements in working capital and taxes paid, cash flows
from operating activities were up $1.9
million year-over-year, coming in at $5.7 million, versus $3.8
million for 2019 year-to-date. The increase was driven
by the higher profitability in 2020, partially offset by non-cash
movements in foreign exchange.
As at June 30, 2020, Imaflex had
approximately $11.4 million of cash
available for operating activities, including the unused portion
under its $12.0 million revolving
line of credit. Imaflex's balance sheet continues to
strengthen, further bolstering the Corporation's financial
flexibility.
ADVASEAL® Update
The Corporation
expects to report final results from the previously announced
Efficacy Trial in the coming weeks. Based on the positive
interim information from that trial, showing ADVASEAL's ability to
release the film's active ingredients (chemicals) into the soil in
the desired manner, the Corporation will now be proceeding with a
more comprehensive Release Study.
The new study, which is targeted to begin in the third quarter
of 2020, will determine the exact timing for release of each active
ingredient coated on ADVASEAL®. This is required to show
compliance with the pre-harvest interval legally established by the
U.S. Environmental Protection Agency (EPA), which is essentially
the wait time required between the application of crop protection
products onto the soil and when a crop can be harvested for safe
human consumption.
The Corporation remains focused on submitting the new
ADVASEAL® registration package with the EPA around year-end
2020. The EPA review process can take up to a year. As
a reminder, the new ADVASEAL® contains all the active
ingredients, not just a herbicide as originally approved by the
EPA.
Impact of COVID-19 – All plants remain fully operational and
running at normal levels
COVID-19 continues to have no material impact on Imaflex's
operations, nor is the Corporation experiencing any delays with its
suppliers or distribution channels. Imaflex is fortunate to
be considered an essential vendor due to the important role its
products play in protecting and preserving, with most of its films
being used in the food and packaging industry. All of the
Corporation's plants remain fully operational, they are running at
normal business levels and no material capital project has been
halted. Each plant has the ability to take on more volume
should it be required due to business interruption at another plant
or heightened order flow. The Corporation is monitoring
developments closely and taking strong preventative measures to
protect its employees, customers and business.
Outlook
"Looking forward, the impact of
COVID-19 on our business, financial situation and results remains
unclear and cannot be predicted," said Mr. Abbandonato. "Any
outbreak at one of our plants, deferrals in purchases, payment
issues with customers, or supply and distribution delays could
impact us. This said, we view these risks as temporary and
believe our solid foundation and dynamic team should allow us to
adapt to any challenges ahead."
"Operationally, we continue to do business in a dynamic pricing
environment. Resin prices have firmed up in recent months,
coming off a market bottom reached earlier this year. As we
have no long term contracts with our customers, we are able to
adjust our pricing accordingly. Though, there is usually a
30-day lag between resin price increases and when we are able to
pass this along to our customers, we do not expect it to have a
material impact on our business in 2020.
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.