Premium Brands Holdings Corporation Announces Record 2012 Third Quarter Revenue and Adjusted EBITDA
(firmenpresse) - VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 11/08/12 -- Premium Brands Holdings Corporation (TSX: PBH), a leading producer, marketer and distributor of branded specialty food products, announced today its results for the third quarter of 2012.
HIGHLIGHTS FOR THE QUARTER
"We are pleased to report another quarter of record revenues and Adjusted EBITDA," said Mr. George Paleologou, President and CEO. "Overall, our businesses continue to see strong growth opportunities through a combination of product innovation, geographical expansion and entering new market segments.
"There is, however, no question that our results for the quarter do not show our full potential. Over the last year we have been investing heavily in the capital improvements, infrastructure and process changes needed to support our growth objectives for the next five years. While these projects will create value for our shareholders over the long term, in the short term they are having a negative impact on our results.
"Looking forward, we are now in the final phase of many of these initiatives and, correspondingly, we will start to see the benefits associated with them in the near future," added 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, Direct Plus, National Direct-to-Store Distribution (NDSD), 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.
Retail's revenue for the third quarter of 2012 as compared to the third quarter of 2011 increased by $45.1 million or 39.8% due to: (i) the acquisition of Piller's in 2011 which resulted in $37.2 million in incremental sales; and (ii) organic growth of $7.9 million representing an organic growth rate of approximately 7.0%.
Retail's organic growth for the quarter, which was within 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. These factors were partially offset by lower sales resulting from the restructuring of the Company's NDSD business' distribution network. This initiative involves the conversion of NDSD's customers in certain defined territories from being serviced by NDSD's direct-to- store delivery trucks to being serviced by exclusive third party distributors that form part of NDSD's distribution network. Hence, for territories that have been converted, the Company now sells its products at a discounted price (which results in a decrease in Retail's revenue) to an exclusive third party distributor who in turn sells and distributes the Company's products to convenience store retailers.
Retail's revenue for the first three quarters of 2012 increased by $161.2 million or 56.7% as compared to the first three quarters of 2011 primarily due to: (i) the acquisitions of Piller's, SJ and Deli Chef in 2011, which resulted in incremental sales of $136.0 million; and (ii) organic growth across a range of products and customers of $25.2 million representing an organic growth rate of approximately 8.9%.
Looking forward (see Forward Looking Statements), for the fourth quarter of 2012 the Company expects Retail's organic sales growth to continue to be within the range of its previous guidance of 6% to 8%.
Foodservice's revenue for the third quarter of 2012 as compared to the third quarter of 2011 increased by $4.1 million or 4.5% due to: (i) general organic growth of $3.4 million representing an organic growth rate of 3.9%; and (ii) increased sales in its Worldsource food brokerage business of $0.7 million resulting from improved trading opportunities.
Foodservice's low organic growth rate as compared to the Company's guidance of 6% to 8% was primarily due to lower seafood sales resulting from exceptionally warm weather that negatively impacted both consumer demand for seafood products and seafood harvesting. Foodservice's sales to its core hotel, restaurant and institutional customers grew at an organic rate of approximately 5.8% which was slightly below the Company's targeted range.
Foodservice's revenue for the first three quarters of 2012 as compared to the first three quarters of 2011 increased by $19.8 million or 7.6% due to: (i) general organic growth of $15.2 million representing a growth rate of 6.2%; (ii) increased sales in its Worldsource food brokerage business of $3.5 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 a very successful salmon fishery in 2011.
Looking forward (see Forward Looking Statements), for the fourth quarter of 2012 the Company expects Foodservice's organic sales growth to be below its previous guidance of 6% to 8% primarily due to: (i) the negative impact on its sales to restaurants and pubs resulting from a delay in the start of the 2012/13 National Hockey League season; and (ii) product supply issues resulting from the shutdown at the end of the third quarter of one of Canada's largest beef processors due to a major product recall.
Retail's gross profit as a percentage of its revenue (gross margin) for the third quarter of 2012 as compared to the third quarter of 2011 decreased from 26.8% to 22.8% due in part to: (i) the acquisition of Piller's in 2011 as this business generally has 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 gross margin for the quarter was 25.7% as compared to 27.0% in the third quarter of 2011. The balance of the decrease in Retail's gross margin was primarily due to: (i) reduced gross margins on product sales transitioned to third party distributors as part of the restructuring of NDSD's distribution network; and (ii) increased plant overheads associated with Retail's new bakery facility, which was completed in the third quarter.
Retail's gross margin for the first three quarters of 2012 as compared to the first three quarters of 2011 decreased from 26.7% to 22.7% due in part to: (i) the acquisitions of Piller's and SJ in 2011; and (ii) the change in selling terms for certain customers as discussed above. Normalizing for these factors, Retail's gross margin for the first three quarters of 2012 was 26.4% as compared to 27.1% for the first three quarters of 2011. The balance of the decrease in Retail's gross margin was primarily due to the restructuring of NDSD's distribution network and increased bakery plant overheads as discussed above.
Foodservice's gross margin for the third quarter of 2012 as compared to the third quarter of 2011 decreased from 19.5% to 18.9% due to a variety of commodity input cost increases including: (i) higher premium beef prices, which were the result of increased buying and promotion of premium beef by a large U.S. based retailer; (ii) higher seafood costs, which were the result of a poor harvest of several species of seafood; and (iii) increased popcorn kernel prices, which were due to relatively poor crops in 2011 and 2012.
Foodservice's gross margin for the first three quarters of 2012 was relatively consistent with its gross margin for the first three quarters of 2011.
Retail's SG&A in the third quarter of 2012 as compared to the third quarter of 2011 increased by $3.0 million primarily due to: (i) the acquisition of Piller's in 2011 which resulted in an increase of $2.9 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 $0.9 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 three quarters of 2012 as compared to the first three quarters of 2011 increased by $12.9 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 $13.5 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 $2.5 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 three quarters of 2012 was 16.2% as compared to 16.5% for the first three 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 third quarter of 2012 as compared to the third quarter of 2011 increased by $0.8 million while its SG&A in the first three quarters of 2012 as compared to the first three quarters of 2011 increased by $2.5 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 three quarters of 2012 was 13.1%, which is consistent with its SG&A as a percentage of revenue of 13.1% for the first three quarters of 2011.
The Company's Adjusted EBITDA for the first three quarters of 2012 as compared to the first three quarters of 2011 increased by $12.7 million or 31.3% to $53.2 million primarily due to: (i) acquisitions; and (ii) organic growth in a number of the Company's legacy businesses. These increases were partially offset by:
Looking forward (see Forward Looking Statements), despite the impact of the decrease in Stuyver's and NDSD's Adjusted EBITDA, as discussed above, the Company still expects its Adjusted EBITDA for 2012 to be within its current guidance of $70.0 million to $75.0 million, albeit likely at the bottom end of this range.
Interest
The increase in the Company's interest and other financing costs for both the third quarter of 2012 as compared to the third quarter of 2011, and for the first three quarters of 2012 as compared to the first three quarters of 2011, was primarily due to: (i) an increase in the Company's average outstanding net funded debt; and (ii) the issuance of $57.5 million of convertible debentures, the proceeds of which were used to repay lower cost senior debt.
Restructuring Costs
Restructuring costs consist of costs associated with the significant restructuring of one or more of the Company's businesses. For the first three quarters of 2012, the Company incurred $4.0 million in restructuring costs consisting of:
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 November 7, 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 November 7, 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: 08.11.2012 - 06:00 Uhr
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