Lassonde Industries Inc. announces its results for the fourth quarter and fiscal 2019

Lassonde Industries Inc. announces its results for the fourth quarter and fiscal 2019

Canada NewsWire

ROUGEMONT, QC, March 26, 2020 /CNW Telbec/ - Lassonde Industries Inc. (TSX: LAS.A) ("Lassonde") posted sales of $1,678.3 million in 2019, up 5.3% from $1,594.0 million in 2018. For the first five months of 2019, sales from Old Orchard Brands, LLC ("OOB"), an entity acquired on May 31, 2018, totalled $50.3 million. Excluding these OOB sales and a $22.4 million favourable foreign exchange impact, sales were up $11.6 million year over year. The 2019 profit attributable to the Company's shareholders totalled $72.0 million compared to $66.4 million last year. Excluding a gain of $13.8 million, net of tax, realized following the settlement of an insurance claim directly related to the OOB acquisition price and some other items not related to operations, the 2019 profit attributable to the Company's shareholders was down $6.5 million year over year. This decrease was due to lower productivity arising from significant investment work undertaken at one of the Company's plants.

 

Financial highlights

(in thousands of dollars)

Fourth quarters

ended

Years

ended


December 31,
2019

December 31,
2018

December 31,
2019

December 31,
2018

Sales

$

432,127

$

426,799

$

1,678,301

$

1,593,996

Operating profit


24,964


25,745


100,826


105,192

Profit before income taxes


40,694


20,429


100,488


88,946

Profit attributable to the Company's shareholders


28,466


15,770


71,977


66,382

Basic and diluted earnings per share (in $)

$

4.10

$

2.26

$

10.37

$

9.50

 

Note: These are financial highlights only. Management's Discussion and Analysis and the audited consolidated financial statements and notes thereto for the year ended December 31, 2019 are available on the SEDAR website at www.sedar.com and on the website of Lassonde Industries Inc.

 

"The fiscal 2019 sales were in line with our expectations, while the Company's operating profit was affected by adverse effects on productivity arising from new equipment installation work at one of our Canadian plants as well as by an increase in production costs at our U.S. plants. We have adjusted our management structure to improve our competitive positioning in the United States and to mitigate the impacts of a labour shortage and of customs duties on certain inputs that are creating instability with respect to our cost base. We are particularly pleased that the Company reduced its debt by $70 million in 2019," said Nathalie Lassonde, Chief Executive Officer of Lassonde Industries Inc. "We are paying close attention to the Sun-Rype integration and to the progression of COVID-19 and its consequences on our activities. We must act responsibly towards our employees while also ensuring that consumers have sufficient supply during this crisis," added Ms. Lassonde.

2019 Financial Results

For 2019, the Company's sales totalled $1,678.3 million, up $84.3 million or 5.3% from $1,594.0 million in 2018. For the first five months of 2019, sales from OOB stood at $50.3 million. Excluding these sales and a $22.4 million favourable foreign exchange impact, the Company's sales were up $11.6 million (0.7%) year over year. This increase was mainly due to an increase in sales of private label products.

The Company's 2019 operating profit totalled $100.8 million, down $4.4 million from $105.2 million last year. For the first five months of 2019, OOB's operating profit was $5.1 million. During 2019, the Company also incurred $1.5 million in expenses related to the acquisition of Sun-Rype Products Ltd. ("Sun-Rype"), which was concluded in January 2020. The 2018 operating profit included a $2.6 million gain resulting from a favourable decision by a U.S. administrative tribunal on product classification and $2.0 million in expenses related to the OOB acquisition. Excluding these items, the Company's 2019 operating profit was down $7.4 million year over year on a comparable basis. This decrease was due to a $4.9 million decrease in the profitability of specialty food products caused by the negative impact on productivity of significant investment-related activities in this business unit. This decrease in the operating profit was also due to a lower profitability in U.S. operations resulting mainly from higher input costs and manufacturing overhead costs, partly offset by improved profitability in the Canadian fruit juice and drink operations. It should be noted that the adoption of IFRS 16 on January 1, 2019 had a $0.6 million favourable impact on the 2019 operating profit.

The Company's financial expenses went from $15.1 million in 2018 to $19.5 million in 2019. This increase was due to a $4.5 million increase in interest expense related to the financing of the OOB acquisition. Excluding this additional interest expense, financial expenses were down $0.1 million, essentially due to a $1.7 million decrease in the interest on long‑term debt, partly offset by a $1.3 million interest expense on lease liabilities resulting from the adoption of IFRS 16 on January 1, 2019.

"Other (gains) losses" went from a $1.1 million loss in 2018 to a $19.2 million gain in 2019. This 2019 gain was mainly due to a $20.8 million gain realized following the settlement of an insurance claim directly related to the OOB acquisition price, partly offset by a $1.0 million loss resulting from a change in the fair value of financial instruments and by $0.8 million in foreign exchange losses. The 2018 loss was mainly due to a $1.5 million loss resulting from a change in the fair value of financial instruments partly offset by $0.4 million in foreign exchange gains.

Profit before income taxes stood at $100.5 million in 2019, up $11.6 million from $88.9 million in 2018.

Income tax expense went from $20.9 million in 2018 to $25.5 million in 2019. At 25.4%, the 2019 effective income tax rate was higher than the 23.5% rate in 2018. This higher effective tax rate mainly reflects changes to U.S. tax regulations affecting the deductibility of certain interest expenses.

The 2019 profit totalled $74.9 million, up $6.9 million from $68.0 million in 2018. It should be noted, however, that the 2019 profit includes a $15.3 million gain, net of tax, realized following the settlement of an insurance claim and a $3.4 million profit from OOB for the first five months of 2019, partly offset by $3.4 million, net of tax, in additional financial expenses related to the financing of the OOB acquisition and by $1.1 million, net of tax, in Sun-Rype acquisition-related costs. In 2018, the profit had included a $1.9 million gain, net of tax, resulting from a favourable decision by a U.S. administrative tribunal on product classification and $1.4 million, net of tax, in expenses related to the OOB acquisition. Excluding these items, the Company's 2019 profit was down $6.8 million year over year.

The 2019 profit attributable to the Company's shareholders was $72.0 million, resulting in basic and diluted earnings per share of $10.37. In 2018, profit attributable to the Company's shareholders had totalled $66.4 million, resulting in basic and diluted earnings per share of $9.50. Excluding the impacts of the OOB acquisition, the gain realized following the settlement of an insurance claim, Sun‑Rype acquisition-related costs and the 2018 gain resulting from a favourable decision by a U.S. administrative tribunal on product classification, the 2019 profit attributable to the Company's shareholders was down $6.5 million year over year.

The Company's operating activities generated $140.7 million in cash during 2019, while they had generated $114.7 million in cash during 2018. OOB's operating activities generated $2.8 million in the first five months of 2019, resulting in a difference of $23.2 million on a comparative basis. Financing activities used $100.7 million in cash during 2019, while they had generated $110.7 million in 2018. During 2018, cash flows generated for the OOB acquisition had totalled $193.3 million, leaving a difference of $18.1 million on a comparative basis. Investing activities used $55.3 million in cash during 2019 compared to $232.2 million used in 2018. Excluding the $196.9 million in cash flows related to the OOB acquisition in 2018, investing activities used $20.0 million more cash when compared to 2018. At year-end 2019, the Company reported a cash and cash equivalents balance of $1.8 million and a bank overdraft of $12.4 million, whereas, at the end of 2018, the cash and cash equivalents balance was $4.6 million and the bank overdraft balance was $nil.

Fourth Quarter Financial Results

For the fourth quarter of 2019, the Company's sales totalled $432.1 million, up $5.3 million or 1.2% from $426.8 million in the fourth quarter of 2018. Excluding a $0.5 million favourable foreign exchange impact, the Company's fourth-quarter sales were up $4.8 million (1.1%) year over year. This increase was mainly due to a favourable impact of selling price adjustments while sales volume remained stable for national brands as well as for private label products.

The Company's operating profit for the fourth quarter of 2019 totalled $25.0 million, down $0.7 million from $25.7 million in the same quarter last year. Excluding $1.5 million in expenses related to the Sun-Rype acquisition, the Company's 2019 fourth-quarter operating profit was up $0.8 million year over year on a comparable basis. The increase came from improved contribution margins realized by the Company's U.S. operations, partly offset by a $5.3 million increase in obsolete inventory costs. It should be noted that the adoption of IFRS 16 on January 1, 2019 had a $0.1 million favourable impact on the 2019 fourth-quarter operating profit.

The Company's financial expenses went from $4.5 million in the fourth quarter of 2018 to $5.1 million in the fourth quarter of 2019. This increase was essentially due to a $0.3 million interest expense on lease liabilities resulting from the adoption of IFRS 16 on January 1, 2019 and a $0.3 million decrease in interest income.

"Other (gains) losses" went from a $0.8 million loss in the fourth quarter of 2018 to a $20.9 million gain in the fourth quarter of 2019. This 2019 fourth-quarter gain was mainly due to a $20.8 million gain realized following the settlement of an insurance claim directly related to the OOB acquisition price, whereas the 2018 fourth-quarter loss was mainly due to a $1.4 million loss resulting from a change in the fair value of financial instruments, partly offset by $0.6 million in foreign exchange gains.

Profit before income taxes stood at $40.7 million in the fourth quarter of 2019, up $20.3 million from $20.4 million in the fourth quarter of 2018.

Income tax expense went from $4.4 million in the fourth quarter of 2018 to $10.3 million in the fourth quarter of 2019. At 25.4%, the 2019 fourth-quarter effective income tax rate was higher than the 21.3% rate in the same quarter of 2018. This higher effective income tax rate mainly reflects the impact of changes to U.S. tax regulations affecting the deductibility of certain interest expenses and special taxes related thereto.

The 2019 fourth-quarter profit totalled $30.4 million, up $14.3 million from $16.1 million in the fourth quarter of 2018. It should be noted, however, that the 2019 profit includes a $15.3 million gain, net of tax, realized following the settlement of an insurance claim, partly offset by $1.1 million, net of tax, in Sun‑Rype acquisition-related costs. Excluding these items, profit was up $0.1 million when compared to the fourth quarter of 2018.

Profit attributable to the Company's shareholders for the fourth quarter of 2019 was $28.5 million, resulting in basic and diluted earnings per share of $4.10. In the fourth quarter of 2018, profit attributable to the Company's shareholders had totalled $15.8 million, resulting in basic and diluted earnings per share of $2.26. Excluding the gain realized following the settlement of an insurance claim and Sun‑Rype acquisition-related costs, the 2019 fourth-quarter profit attributable to the Company's shareholders was similar to the 2018 fourth-quarter profit attributable to the Company's shareholders.

Outlook

For the twelve-month period ended December 31, 2019, the Company observed a decrease in industry sales in both the U.S. and Canadian fruit juice and drink markets. When adjusted to reflect foreign exchange impacts and excluding OOB's sales for the first five months of 2019 to maintain a comparable basis, the Company's sales were up 0.7% in 2019 compared to 2018. Barring any significant external shocks (and excluding foreign exchange impacts and the impact of the Sun-Rype acquisition to maintain a comparable basis), the Company believes that, for 2020, it will be able to achieve consolidated annual sales growth rate slightly above that of 2019.

The Company has noted that the competitive environment continues to be difficult in terms of private label products sold in the U.S. While it has seen a slight improvement in the profitability of its U.S. activities in the last quarter, its ability to reflect certain cost increases in selling prices remains a cause of concern. In Canada, the Company expects that the negative effects on its production output resulting from investments being made in one of its plants should gradually be resolved in the first quarter of 2020, as the new equipment is now operational.

The Company is paying close attention to the progression of COVID-19 in North America and to the resulting impacts on economic activity as well as on consumer spending habits. It has seen a recent increase in retail juice and drink sales but is concerned about how the crisis will affect sales to the food service segment.

The Company expects its investment-related cash outflows to exceed the average of the last five years. Among other things, this increase is attributable to the final stage of a major investment project intended to provide the Company with additional capabilities for specialty food products. The Company also expects to make investments designed to enhance the flexibility of production capacity for fruit juices and beverages in the U.S. and to upgrade its ERP software in Canada. It believes that its use of investing cash flows could reach between $45 million and $55 million in 2020. These disbursements will have a limited impact on the Company's profit for 2020 but will affect its cash flows.

About Lassonde

Lassonde Industries Inc. is a North American leader in the development, manufacture and sale of ready-to-drink juices and drinks marketed under brands such as Apple & Eve, Everfresh, Fairlee, Fruité, Graves, Oasis, Old Orchard, Rougemont and Sun-Rype. Lassonde is 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. The Company also produces 100%-fruit snacks as well as bars and snacks made with natural ingredients.

Lassonde also develops, manufactures and markets specialty food products under brands such as Antico and Canton. The Company also imports and markets selected wines from various countries and manufactures apple ciders and cider‑based beverages.

The Company produces superior quality products through the expertise of approximately 2,600 people working in 18 plants across Canada and the United States. To learn more, visit www.lassonde.com.

Caution Concerning Forward-Looking Statements 

In this document and in other documents filed with Canadian regulatory authorities or in other communications, the Company may from time to time make written or oral forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements notably include estimates, expectations, forecasts, and projections of future investment spending, revenues, expenses, earnings, profit, indebtedness, financial position, losses, upcoming projects, business and management strategies, and business growth and expansion. In the context of this document, forward-looking statements are particularly used to discuss preliminary results, the rate of sales growth, and profit attributable to shareholders. The forward-looking statements contained herein are used to help readers better understand Lassonde's financial position and the results of its operations as at the dates presented and may not be appropriate for other purposes. Forward-looking statements can be recognized by such words as "may," "should," "believes," "predicts," "plans," "expects," "intends," "anticipates," "estimates," "projects," "objective," "continues," "proposes," "targets," or "aims" as well as words and expressions of a similar nature and whether they are used in the affirmative or negative or used in the conditional or future tense. Forward-looking statements also include any statements that do not refer to historical facts.

By their very nature, forward-looking statements are based on assumptions and involve inherent risks and uncertainties, both general and specific in nature. It is therefore possible that the forecasts, projections and other statements will not be achieved or will differ significantly from those expressed or implied in such forward-looking statements or could affect the extent to which a particular forecast, projection or other statement materializes. Although Lassonde believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurances that these expectations will prove to be correct.

Readers are cautioned against placing undue reliance on forward-looking statements when making decisions, as the actual results could differ considerably from the opinions, plans, objectives, expectations, forecasts, estimates and intentions expressed in such forward-looking statements due to various significant factors. Such factors include, among others, the economic, industrial, competitive and regulatory environment in which Lassonde operates or factors that are likely to have an impact on its operations, its ability to attract and retain customers, consumers, and qualified staff, the availability and cost of raw materials and transportation, its operating costs, and the price of its finished products in the various markets where it operates.

The Company cautions that the foregoing list of factors is not exhaustive. For additional information about the risks, uncertainties, and assumptions that could cause Lassonde's actual results to differ from its stated expectations, readers may also consult the "Uncertainties and Principal Risk Factors" section of the Company's most recent annual MD&A and the other documents it files from time to time with securities regulators in Canada and available on sedar.com. The forward-looking statements contained in this press release reflect the Company's expectations on this date and are subject to change after this date. Lassonde does not undertake to update publicly or to revise these forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable legislation or regulation.

SEDAR registration number: 00002099

SOURCE Lassonde Industries Inc.

Cision View original content: http://www.newswire.ca/en/releases/archive/March2020/26/c3132.html

Copyright CNW Group 2020