TICKER SYMBOL: IFX
MONTREAL, Aug. 28, 2013 /CNW Telbec/ - Imaflex Inc. (the "Company") (TSXV: IFX) announces results for the quarter ended June 30, 2013.
(CDN $ thousands, except per share amounts)
|Q2 2013||Q2 2012||YTD 2013||YTD 2012|
|Cost of sales||12,371||10,640||23,394||21,128|
|Gross profit ($) (before amortization)||1,815||1,562||3,589||2,892|
|Gross profit (%)(before amortization)||12.8%||12.8%||13.3%||12.0%|
|Amortization of production equipment||273||264||538||518|
|Gross profit (%)||10.9%||10.6%||11.3%||9.9%|
|FX loss (gain)||(289)||(157)||(457)||(6)|
|Profit (loss) before income taxes||521||235||821||178|
|Provision for income taxes||125||86||195||133|
|Basic and diluted earnings (loss) per share||0.009||0.003||0.015||0.001|
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).
Summary - Results of Operations
Sales and profitability in the second quarter of 2013 continued to increase over previous quarters. In addition to having benefited from a foreign exchange gain during the second quarter, the increase in the net income is also due to operational improvements. The ongoing development, testing and regulatory approval of the new product led to an increase in administrative costs, but these increases have been offset by the improvements in the operations.
Sales of mulch film also improved as the Company is regaining part of the market share that was lost in 2010. Management is continuing to look for additional opportunities in the mulch film market while waiting for the launch of the new product. The full integration of the business acquired in 2012 is continuing. Benefits and profitability have already begun materializing and will accelerate with time.
Sales in the second quarter of 2013 increased by approximately $ 1,984,000 compared to sales in the second quarter of 2012. This is explained by increases in sales of mulch film, garbage bags and packaging film as well as by the sales growth of the acquired business following the integration of the operations in the US. Management is looking to further develop the mulch film market and is seeking new opportunities for its other films.
Sales for the six-month period increased by approximately $ 2,963,000, due to the fact that there are two additional months of sales from the acquired assets in 2013 as well as general improvements in sales of mulch film and packaging film. Expectations of decreases in the price of polyethylene resin also had an important negative impact on sales during the first six months of 2012.
Gross profit margin
For the second quarter, the gross profit before amortization of production equipment increased by approximately $ 253,000, going from $ 1,562,000 in 2012 to $ 1,815,000 in 2013. This increase is mainly explained by the increase in sales as the gross margin before amortization of production equipment remained constant at 12.8% in both quarters. The depreciation of production equipment was fairly stable in absolute value but due to higher sales in 2013, was lower as a percentage of sales. This led to an increase in the gross margin, from 10.6% in 2012 to 10.9% in 2013, representing an increase of approximately $ 244,000.
Over the six-month period, the gross profit before amortization of production equipment increased by $ 697,000, from $ 2,892,000 in 2012 to $ 3,589,000 in 2013. This is explained by the increased sales over the period, more profitable sales in the first quarter and improved results from our US operations. As a percentage of sales, the gross profit before amortization of production equipment increased from 12.0% in 2012 to 13.3% in 2013, mainly due to a higher margin during the first quarter. The amortization of production equipment increased by approximately $ 20,000, the gross profit increased by $ 677,000 and the gross profit margin increased from 9.9% in 2012 to 11.3% in 2013. Increases in sales in the Canadian operations over the six-month period were achieved with only slight increases in non-variable costs, therefore ensuring that the additional sales generate gross profit.
Selling and administrative
Selling and administrative expenses increased from approximately $ 1,078,000 in 2012 to $ 1,189,000 in 2013. This increase is mainly explained by higher commissions paid due to higher sales as well as research and development costs and professional fees related to the new active ingredient mulch film destined for the agricultural market. These expenses are required to bring the film to market and to obtain all necessary regulatory approvals. Although these expenses will not recur every quarter going forward, management expects that throughout 2013 there will be additional costs related to this new product. As a percentage of sales, selling and administrative expenses decreased from 8.8% in 2012 to 8.4% in 2013.
Over the six-month period, selling and administrative expenses increased by approximately $ 379,000. This increase is due to new staff acquired through the business acquisition, additional professional fees and research and development relating to new products as well as increased commissions due to the increase in sales.
Profit for the second quarter as well as the six-month period improved in 2013 compared to 2012 due to favorable variances in the gross margin, finance expenses and foreign exchange movements. Even excluding the impact of the foreign exchange gain, results have improved in 2013 compared to 2012. However, these improvements were offset by higher administrative expenses and sales expenses and an increase in the provision for income taxes.
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 1.85%. The line of credit is secured by trade receivables and inventories. As at June 30, 2013, the Company had drawn $ 6,102,802 on its line of credit ($ 6,103,876 as at December 31, 2012). The Company's working capital decreased slightly since December 31, 2012, going from $ 2,303,260 to $ 2,259,270. The increase in non-cash short term assets was greater than the increase in non-cash short term liabilities, but the inclusion of the balance of sale in short term liabilities and the decrease in cash offset these increases. The Company believes it has sufficient capital to continue operating efficiently through the liquidity available in its working capital and the liquidity that will be generated by its operations. Within twelve months, only one bank debt will remain outstanding. The Company's current capital structure should therefore enable it to meet all of its short term obligations. As part of its normal management process, the Company continuously monitors its capital structure and considers the increase in indebtedness or the issuance of shares as possible options to optimize its capital structure.
Management's expectations for 2013 were that all of our four manufacturing entities would contribute positively to our consolidated profitability by year-end. This quarter's performance once again confirms we have begun to recreate the foundations of profitability we once had.
Though there remains much work to enable us to return to the profitability experienced before we expanded in the US, management feels it is realistic to imagine we will get there in the course of the next 18 months. We will do so by growing revenues in the agricultural market: Canslit re-acquiring more of the metalized film revenues it forewent and increasing revenues in our high-density mulch films which are made at one of our Thomasville facilities.
This confidence in growth is based on the excellent ratings that the United States Environmental Protection Agency ("EPA") has given both our metal and our high-density films, and the fact that our sales team, devoted totally to selling this product, is now taking shape.
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.
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 shown as "Earnings before interest, taxes, non-controlling interest, 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.