Highlights
- YTD 2022 net income up 28.3% to $8.6
million (EPS1: $0.17), versus $6.7M (EPS: $0.13)
in 2021
- Q3 2022 net income up 12.6% to $3.1
million (EPS: $0.06),
versus $2.8 million (EPS:
$0.05) in 2021
- Q3 2022 gross profit of $4.3
million (16.4% of sales), versus $4.4
million (14.9% of sales) in 2021
- Submitted ADVASEAL® registration
package to the US Environmental Protection Agency (EPA)
- Contributed $3.9 million
towards equipment purchases and debt repayments in Q3 2022, while
also generating free cash flow2 of $3.2 million
- Cash available for operating activities at quarter end
totalled $18.0 million,
including a cash balance of
$6.8 million and another $11.2 million under Imaflex's $12.0 million revolving line of credit
- Full year 2022 net income expected to surpass record net
income achieved in FY 2021
MONTRÉAL, Nov. 24,
2022 /CNW Telbec/ - Imaflex Inc. ("Imaflex" or
the "Corporation") (TSX-V: IFX) reports consolidated financial
results for the third quarter (Q3) ended September 30, 2022 and provides a business
update. All amounts are in Canadian dollars.
"Imaflex delivered another good quarter, despite a challenging
inflationary environment, the temporary delay of sales to a large
customer and a slowdown at our Montréal plant due to the annual
vacation shutdown, along with a COVID outbreak at quarter end,"
highlighted Mr. Joe Abbandonato,
President and Chief Executive Officer of Imaflex. "Although this
resulted in lower sales volumes, profitability remained respectable
and we should surpass the record net income achieved in calendar
2021. Looking ahead, the delivery of the first of three multi-layer
extruders remains on track to arrive around year-end. Furthermore,
the move towards the commercialization of our next generation
agricultural film has progressed, with the Corporation recently
submitting the ADVASEAL HG® (ADVASEAL®)
registration package to the U.S. Environmental Protection
Agency."
Consolidated Financial Highlights (unaudited)
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
CDN $ thousands,
except per share amounts
(or otherwise indicated)
|
2022
|
2021
|
% Change
|
|
2022
|
2021
|
% Change
|
Revenues
|
26,569
|
29,459
|
(9.8) %
|
|
89,756
|
81,770
|
9.8 %
|
Gross Profit
|
4,349
|
4,396
|
(1.1) %
|
|
14,717
|
13,498
|
9.0 %
|
Selling & admin.
expenses
|
1,947
|
1,806
|
7.8 %
|
|
5,979
|
5,267
|
13.5 %
|
Foreign exchange
(gains) losses
|
(1,369)
|
(580)
|
(136.0) %
|
|
(1,720)
|
97
|
(1,873.2) %
|
Net income
|
3,123
|
2,774
|
12.6 %
|
|
8,625
|
6,725
|
28.3 %
|
Basic EPS
|
0.06
|
0.05
|
20.0 %
|
|
0.17
|
0.13
|
30.8 %
|
Diluted EPS
|
0.06
|
0.05
|
20.0 %
|
|
0.17
|
0.13
|
30.8 %
|
Gross margin
|
16.4 %
|
14.9 %
|
1.5 pp
|
|
16.4 %
|
16.5 %
|
(0.1)
pp
|
Selling & admin.
expenses as % of revenues
|
7.3 %
|
6.1 %
|
1.2 pp
|
|
6.7 %
|
6.4 %
|
0.3 pp
|
EBITDA2 (Excluding FX)
|
3,454
|
3,490
|
(1.0) %
|
|
11,761
|
10,897
|
7.9 %
|
EBITDA
|
4,823
|
4,070
|
18.5 %
|
|
13,481
|
10,800
|
24.8 %
|
EBITDA
margin
|
18.2 %
|
13.8 %
|
4.4 pp
|
|
15.0 %
|
13.2 %
|
1.8 pp
|
|
|
______________________________
|
1
|
Earnings Per Share:
based on basic and diluted weighted shares
outstanding
|
2
|
See header titled
"Caution Regarding non-IFRS Financial Measures" which follows.
EBITDA: Earnings Before Interest, Taxes, Depreciation, and
Amortization
Free Cash Flow: net cash generated by operating activities less net
cash used in investing activities.
|
Financial Review: Quarter Ended September 30
Revenues
Revenues were $26.6
million for the third quarter of 2022, down 9.8% from
$29.5 million in 2021. The decrease
was partially offset by product mix, including strong metalized
film sales, and favourable year-over-year movements in foreign
exchange. Sales were impacted by reduced order levels in the
current quarter, driven by a temporary slowdown from a large
customer who asked for an unexpected product redesign and a COVID
outbreak at Imaflex's Montreal
plant in September 2022. As well,
resin costs went down during the quarter, resulting in lower sales
prices. As Imaflex has no long-term contracts, it is able to adjust
product pricing in accordance with resin input costs.
For the year-to-date, revenues came in at $89.8 million, up 9.8% from $81.8 million in 2021. Growth was driven by
product pricing, which rose in line with increased sales of higher
margin offerings and additional costs for some resins. Sales of
metalized films were particularly strong, reflecting the strength
of Imaflex's diversified line-up of products. This strong
performance was partially offset by the reduced volumes seen in the
third quarter of 2022.
Gross Profit
Gross profit for the current
quarter was impacted by resin price fluctuations. Resin price
decreases are normally reflected immediately in product pricing for
Imaflex's customers, while increases usually take about 30 days to
be priced in. As such, the effect of a resin price decrease is that
an immediate opportunity loss is incurred with respect to resin
inventory previously purchased when prices were higher. Despite
this, the gross profit remained relatively stable, coming in at
$4.3 million (16.4% of sales) for the
current quarter, versus $4.4 million
(14.9% of sales) in the prior year. This is largely due to
Imaflex's on-going efforts to drive sales of higher value products
and favourable year-over-year movements in foreign exchange. This
quarter's higher gross profit margin was also supported by the
lower sales base.
The gross profit for the first nine month of 2022 was up 9.0%
year-over-year, coming in at $14.7
million (16.4% of sales) versus $13.5
million (16.5% of sales) in 2021. The year-to-date gross
profit was positively impacted by Imaflex's continuing shift to
higher value business segments and favourable year-over-year
movements in foreign exchange. In addition, the Corporation
benefited from its ongoing initiatives to drive operating
efficiencies and enhance production capabilities throughout the
business. This was partially offset by additional costs for some
resins and inflationary pressures, such as fuel surcharges from
carriers and some suppliers and higher product packaging and other
costs.
Operating Expenses
Selling and Administrative expenses
came in at $1.9 million for the
quarter, up slightly from $1.8
million in the prior year. The increase was largely due to
new employee hires. Selling and Administrative expenses as a
percentage of sales were slightly higher than 2021, coming in at
7.3% for the current quarter versus 6.1% in 2021. The year-over
year variance was due to the aforementioned expense increases and
the lower revenue base in the current quarter.
____________________________________
|
2
|
See header titled
"Caution Regarding non-IFRS Financial Measures" which follows.
EBITDA: Earnings Before Interest, Taxes, Depreciation, and
Amortization
Free Cash Flow: net cash generated by operating activities less net
cash used in investing activities.
|
For 2022 year-to-date, Selling and Administrative expenses came
in at $6.0 million (6.7% of sales)
versus $5.3 million (6.4% of sales)
in 2021. The expense increase is largely due to the same factors
outlined for the quarter, along with some non-recurring expenses
incurred in the first quarter of 2022.
Due to the appreciation of the US dollar against the Canadian
dollar, Imaflex recorded a foreign exchange gain of $1.4 million in the current quarter, versus a
$0.6 million gain in 2021, resulting
in a $0.8 million favourable
year-over-year variance. For 2022 year-to-date, Imaflex had a
foreign exchange gain of $1.7
million, versus a loss of $0.1
million in 2021, resulting in a $1.8
million favourable 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 was $3.1 million for the current quarter, up 12.6%
from $2.8 million in the prior year.
The increase was largely due to foreign exchange gains and
Imaflex's continued move towards the sale of higher value products.
This allowed the Company to maintain comparable year-over-year
gross profit levels, despite the lower sales base and higher
selling and administrative expenses.
For the first nine months of 2022, net income came in at
$8.6 million, up 28.3% from
$6.7 million in 2021. The increase
was largely due to foreign exchange gains and the larger gross
profit, partially offset by higher selling and administrative
expenses.
EBITDA came in at $4.8 million
(18.2% of sales) for the current quarter, up 18.5% from
$4.1 million (13.8% of sales) in
2021. On a constant currency basis, EBITDA came in at $3.5 million (13.0% of sales), compared to
$3.5 million (11.8% of sales) in
2021.
Liquidity and Capital Resources
Net cash flows
generated by operating activities before movements in working
capital and taxes paid stood at $3.5
million for the current quarter, essentially unchanged from
2021. Including movements in working capital and taxes paid, net
cash generated by operating activities stood at $5.5 million, up notably from $3.6 million in the corresponding prior-year
period. The increase over 2021 was driven by movements in trade and
other receivables, with receivables decreasing in the current
quarter versus an increase in 2021. This was partially offset by
movements in inventories, with Imaflex recording a lower decrease
in inventories in the current quarter versus 2021.
For the year-to-date, cash flows generated by operating
activities, before movements in working capital and taxes paid,
stood at $11.9 million, up from
$10.8 million in the corresponding
prior-year period. Growth was largely driven by the higher profit
in 2022, partially offset by movements in foreign exchange.
Including movements in working capital and taxes paid, net cash
generated by operating activities stood at $12.5 million, up significantly from $6.6 million in 2021. The increase was due to
movements in trade and other receivables and inventories, partially
offset by movements in trade and other payables.
As at September 30, 2022, cash
available for operating activities totaled $18.0 million, including a cash balance of
$6.8 million and another $11.2 million under Imaflex's $12.0 million revolving line of credit. This
strong position was achieved despite $2.3
million of payments in the quarter largely towards the major
equipment purchases announced in Q2 2022, along with an additional
$1.6 million of payments to reduce
bank indebtedness and long-term debt. These investments further
enhance the Company's production capacity and capabilities in order
to heighten sales and profitability.
ADVASEAL® Registration Package
Submitted to the EPA
On November 7,
2022, Imaflex announced that it had submitted the
ADVASEAL® registration package to the U.S. Environmental
Protection Agency (EPA) for approval as a new physical pesticide
formulation. In conjunction with this, the Corporation submitted
the required active ingredient registrations for approval as
generic pesticides for use in the manufacturing of
ADVASEAL®. The EPA review process can take up to a year
to complete. Management believes the registration process will be
positive as the generic active ingredients to be used with
ADVASEAL® are effectively used by growers today. As
well, the Company previously received EPA approval of its
herbicidal active ingredient release film, ADVASEAL®
HSM.
Outlook
"Although the COVID outbreak at our Montréal
plant continued into the fourth quarter, it is now under control
and the plant has returned to normal operations," highlighted Mr.
Abbandonato. In addition, an independent lab has already confirmed
the functionality of the aforementioned product redesign for a
large client and customer trials are commencing. The Corporation
fully expects net income to surpass the record level achieved in
calendar 2021. "Moving ahead, our new equipment purchases begin
arriving in the coming months, further enhancing our capabilities
and capacity. Moreover, our solid balance sheet and strong cash
flows provide the financial flexibility to continue to invest in
high return initiatives."
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.