Premium Brands Holdings Corporation Announces Record 2012 Second Quarter Revenue and Earnings
(firmenpresse) - VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 08/09/12 -- Premium Brands Holdings Corporation (TSX: PBH), a leading producer, marketer and distributor of branded specialty food products, announced today its results for the second quarter of 2012.
HIGHLIGHTS
"Our record results for the quarter reflect robust demand for our products in both the foodservice and retail channels," said Mr. George Paleologou, President and CEO. "Moderating commodity input costs as well as improved plant efficiencies resulting from a combination of recent capital investments and higher production volumes also contributed to our improved results.
"Looking forward, while we are concerned about the unusually severe drought in the U.S. Midwest and its possible inflationary impact on our input commodity costs, we view this as a short term issue and remain confident in our business model and the ability of our diverse portfolio of businesses to adapt to any challenges created by this situation.
"In the meantime, we continue to focus on optimizing and expanding our production capacities as demand for our premium, high quality products accelerates across all categories and channels. Some of our more recent initiatives include a new sandwich facility in Laval, Quebec that was commissioned in July, a new state-of-the-art artisan bakery in Langley, B.C. that was brought into full production in June, and the construction of a new seafood processing and distribution facility in Richmond, B.C. that commenced in May.
"I have no doubt that the disciplined execution of our core strategies will continue to generate superior returns for our shareholders over the long-term," stated Mr. Paleologou.
About Premium Brands
Premium Brands owns a broad range of leading specialty food manufacturing and differentiated food distribution businesses with operations in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nevada and Washington State. The Company services over 26,000 customers and its family of brands and businesses include Grimm's, Harvest, McSweeney's, Bread Garden Go, Hygaard, Hempler's, Quality Fast Foods, Gloria's Best of Fresh, Harlan Fairbanks, Creekside Bakehouse, Centennial Foodservice, B&C Foods, Shahir, Duso's, Maximum Seafood, SK Food Group, OvenPride, Hub City Fisheries, Audrey's, Deli Chef and Piller's.
RESULTS OF OPERATIONS
Retail's revenue for the second quarter of 2012 as compared to the second quarter of 2011 increased by $59.9 million or 64.9% due to: (i) the acquisitions of Piller's and SJ in 2011 which resulted in $49.7 million in incremental sales; and (ii) organic growth of $10.2 million representing an organic growth rate of approximately 11.1%.
Retail's strong organic growth for the quarter, which exceeded the Company's targeted range of 6% to 8%, was due to a range of factors including: (i) a variety of new product and customer sales initiatives; (ii) price increases across a broad range of products; and (iii) favourable weather conditions in most of Retail's markets across Canada.
Retail's revenue for the first two quarters of 2012 increased by $116.1 million or 67.9% as compared to the first two quarters of 2011 primarily due to: (i) the acquisitions of Piller's, SJ and Deli Chef in 2011, which resulted in incremental sales of $98.8 million; and (ii) organic growth across a range of products and customers of $17.3 million representing an organic growth rate of approximately 10.1%.
Looking forward (see Forward Looking Statements), for the second half of 2012 the Company expects Retail's sales growth to either exceed or be at the top end of its guidance for organic growth of 6% to 8%.
Foodservice's revenue for the second quarter of 2012 as compared to the second quarter of 2011 increased by $7.2 million or 7.9% due to: (i) general organic growth of $5.3 million representing an organic growth rate of 6.3%; and (ii) increased sales in its Worldsource food brokerage business of $1.9 million due to improved trading opportunities.
Foodservice's organic growth, which was within the Company's guidance of 6% to 8%, was driven by a range of factors including: (i) higher sales to its core hotel, restaurant and institutional customers as a result of several factors including overall improved consumer spending in this channel and the success of its recently completed fresh burger patty production facility; and (ii) improved concessionary product sales due to favourable weather conditions across most of western Canada. These factors were partially offset by relatively flat seafood sales in the Ontario market due to hot weather conditions that negatively impacted consumer demand.
Foodservice's revenue for the first two quarters of 2012 as compared to the first two quarters of 2011 increased by $15.7 million or 9.4% due to: (i) general organic growth of $11.8 million representing a growth rate of 7.6%; (ii) increased sales in its Worldsource food brokerage business of $2.8 million; and (iii) $1.1 million in unusual trading volume in its Hub City Fisheries business resulting from the sale of excess inventory relating to the 2011 salmon fishery.
Looking forward (see Forward Looking Statements), the Company is maintaining its guidance for Foodservice's organic growth rate at 6% to 8%.
Retail's gross profit as a percentage of its revenue (gross margin) for the second quarter of 2012 as compared to the second quarter of 2011 decreased from 26.6% to 23.4% primarily due to: (i) the acquisitions of Piller's and SJ in 2011 as these businesses generally have lower average gross margins as compared to Retail's other businesses; and (ii) a change in selling terms whereby certain customers now receive their products FOB the Company's plant versus FOB the customers' warehouses. This resulted in the elimination of freight being billed to these customers and corresponding decreases in gross profit and selling expenses.
Normalizing for the above factors, Retail's margin for the quarter was 27.8% as compared to 26.7% in the second quarter of 2011. The increase in Retail's normalized gross margin was due primarily to: (i) lower costs, albeit still at historically high levels, for a variety of input commodities; and (ii) the impact of margin enhancement initiatives implemented over the last six months including selling price increases, production cost reduction programs and product packaging changes.
Retail's gross margin for the first two quarters of 2012 as compared to the first two quarters of 2011 decreased primarily due to the same factors that resulted in its lower gross margin in the second quarter. Normalizing for these factors, Retail's gross margin for the first two quarters of 2012 was 26.7%, which is consistent with its gross margin for the first two quarters of 2011.
Foodservice's gross margin for the second quarter of 2012 was consistent with its gross margin in the second quarter of 2011 but below average historic levels due to: (i) continued record high costs for certain premium beef input commodities; and (ii) normal fluctuations in its gross margin.
Foodservice's gross margin for the first two quarters of 2012 was consistent with its gross margin for the first two quarters of 2011.
Selling, General and Administrative Expenses (SG&A)
Retail's SG&A in the second quarter of 2012 as compared to the second quarter of 2011 increased by $4.3 million primarily due to: (i) the acquisitions of Piller's and SJ in 2011 which resulted in an increase of $4.7 million; and (ii) a variety of items consisting primarily of variable selling costs associated with
Retail's organic sales growth. These increases were partially offset by: (i) a decrease in freight costs of approximately $0.8 million due to a change in selling terms whereby certain customers now receive their products FOB the Company's plant versus FOB the customers' warehouses. This resulted in the elimination of freight being billed to these customers and corresponding decreases in gross profit and selling expenses; and (ii) reduced distribution related costs resulting from the rationalization of Retail's DSD Network.
Retail's SG&A for the first two quarters of 2012 as compared to the first two quarters of 2011 increased by $9.9 million primarily due to: (i) the acquisitions of Piller's, SJ and Deli Chef in 2011 which resulted in an increase in Retail's SG&A of $10.6 million; and (ii) a variety of items consisting primarily of variable selling costs associated with Retail's organic sales growth. These increases were partially offset by: (i) a decrease in freight costs of approximately $1.6 million due to the change in selling terms whereby certain customers now receive their products FOB the Company's plant versus FOB the customers' warehouses; and (ii) reduced distribution related costs resulting from the rationalization of Retail's DSD Network.
Normalizing for the acquisitions of Piller's and SJ and for the impact of the change in selling terms for certain customers, Retail's SG&A as a percentage of revenue for the first two quarters of 2012 was 16.5% as compared to 17.0% for the first two quarters of 2011. The decrease in Retail's normalized SG&A as a percentage of revenue was due to a range of factors including reduced distribution related costs resulting from the rationalization of its DSD Network.
Foodservice's SG&A in the second quarter of 2012 as compared to the second quarter of 2011 increased by $1.0 million while its SG&A in the first two quarters of 2012 as compared to the first two quarters of 2011 increased by $1.8 million. Both increases were due to a variety of items including higher variable selling costs associated with Foodservice's organic sales growth.
Foodservice's SG&A as a percentage of revenue for the first two quarters of 2012 was 13.2%, which is consistent with its SG&A as a percentage of revenue of 13.4% for the first two quarters of 2011.
The Company's Adjusted EBITDA for the first two quarters of 2012 as compared to the first two quarters of 2011 increased by $10.1 million or 44.3% primarily due to: (i) acquisitions; (ii) organic growth in a number of the Company's legacy businesses; (iii) improved selling margins resulting from a variety of factors including lower input commodities costs, increases in product selling prices, production cost reduction programs and product packaging changes; and (iv) reduced distribution related costs resulting from the rationalization of the Company's DSD Network.
The Company's Adjusted EBITDA as a percentage of revenue (Adjusted EBITDA margin) for the first two quarters of 2012 increased to 7.0% as compared to 6.8% for the first two quarters of 2011. This increase was primarily due to improved selling margins and reduced distribution costs as discussed above. These factors were partially offset by the impact of acquisitions completed in 2011 as the average Adjusted EBITDA margins generated by these businesses is lower than those of the Company's legacy businesses.
Normalizing for acquisitions, the Company's Adjusted EBITDA margin for the first two quarters of 2012 was 7.4%.
Looking forward (see Forward Looking Statements), despite the Company's Adjusted EBITDA for the first half of the year exceeding its expectations, it is reducing its Adjusted EBITDA guidance for 2012 from the current range of $75.0 million to $80.0 million to a range of $70.0 million to $75.0 million. This is based on:
The Company views these issues as short term in nature and expects that any impact resulting from them will be mitigated in the longer term by a return to normal market conditions and/or product selling price increases.
Interest
The increase in the Company's interest and other financing costs for both the second quarter of 2012 as compared to the second quarter of 2011, and for the first two quarters of 2012 as compared to the first two quarters of 2011, was primarily due to an increase in the Company's net funded debt.
Restructuring Costs
Restructuring costs consist of costs associated with the significant restructuring of one or more of the Company's businesses. In the second quarter of 2012, the Company incurred $0.9 million in restructuring costs consisting of:
For the first two quarters of 2012, the Company incurred restructuring costs associated with its DSD network, sandwich production and artisan bread initiatives of $0.6 million, $0.4 million and $0.6 million, respectively.
FREE CASH FLOW
The following table provides a reconciliation of free cash flow to cash flow from operating activities:
FORWARD LOOKING STATEMENTS
This discussion and analysis contains forward looking statements with respect to the Company, including its business operations, strategy and financial performance and condition. These statements generally can be identified by the use of forward looking words such as "may", "could", "should", "would", "will", "expect", "intend", "plan", "estimate", "project", "anticipate", "believe" or "continue", or the negative thereof or similar variations.
Although management believes that the expectations reflected in such forward looking statements are reasonable and represent the Company's internal expectations and belief as of August 8, 2012, such statements involve unknown risks and uncertainties beyond the Company's control which may cause its actual performance and results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward looking statements.
Factors that could cause actual results to differ materially from the Company's expectations include, among other things: (i) seasonal and/or weather related fluctuations in the Company's sales; (ii) changes in consumer discretionary spending resulting from changes in economic conditions and/or general consumer confidence levels; (iii) changes in the cost of raw materials used in the production of the Company's products; (iv) changes in the cost of products sourced from third party manufacturers and sold through the Company's proprietary distribution networks; (v) risks associated with the Company's conversion from a publicly traded income trust to a publicly traded corporation, including related changes in Canada's income tax laws; (vi) changes in the Company's relationships with its larger customers; (vii) potential liabilities and expenses resulting from defects in the Company's products; (viii) changes in consumer food product preferences; (ix) competition from other food manufacturers and distributors; (x) execution risk associated with the Company's growth initiatives; (xi) risks associated with the Company's business acquisition strategies; and (xii) new government regulations affecting the Company's business and operations. Details on these risk factors as well as other factors can be found in the Company's 2011 MD&A, which is filed electronically through SEDAR and is available online at .
Unless otherwise indicated, the forward looking information in this document is made as of August 8, 2012 and, except as required by applicable law, will not be publicly updated or revised. This cautionary statement expressly qualifies the forward looking information in this document.
Contacts:
Premium Brands Holdings Corporation
George Paleologou
President and CEO
(604) 656-3100
Premium Brands Holdings Corporation
Will Kalutycz
CFO
(604) 656-3100
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Datum: 09.08.2012 - 05:00 Uhr
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