Premium Brands Holdings Corporation Announces Third Quarter Results
(firmenpresse) - VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 11/07/13 -- 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 2013.
HIGHLIGHTS
SUMMARY FINANCIAL INFORMATION
"The majority of our businesses, including our foodservice and sandwich groups, delivered solid results for the quarter driven by strong demand for their products across a variety of sales channels. Unfortunately a large part of this success was offset by a spike in the cost of certain input protein commodities that temporarily impacted the margins of our deli group," said Mr. George Paleologou, President and CEO.
"Our deli group's results were also negatively impacted by operational issues resulting from the transitioning of production from an older plant that was shut down earlier this year to several of our other plants. The majority of these issues have now been addressed and we expect to see a significant improvement in the deli group's earnings over the next several quarters.
"We are very pleased with the progress all of our businesses are making in positioning themselves for continued growth in both their top and bottom lines. Over the last two years we have invested a significant amount of capital in them and are now on the cusp of realizing on these investments, both through improved margins and sales growth.
"We are also very excited to be announcing our North American sandwich group's new initiative to build a $21.6 million state-of-the-art production facility in the north eastern U.S. This facility will complement the sandwich group's facilities in Reno, NV, Laval, QC and Edmonton, AB and will give the business the capacity needed to continue growing at double digit rates. Furthermore, this project will position our sandwich group, which is already one of, if not the largest, prepared sandwich businesses in North America, to provide national sandwich assembly solutions to retail and restaurant chains across North America," 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 22,000 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 Food Distributors, Shahir, Wescadia, Duso's, Maximum Seafood, SK Food Group, OvenPride, Hub City Fisheries, Audrey's, Deli Chef, Piller's and Freybe.
RESULTS OF OPERATIONS
Revenue
Retail's revenue for the third quarter of 2013 as compared to the third quarter of 2012 increased by $22.6 million or 14.4% due to: (i) the acquisition of Freybe which accounted for $19.9 million of the increase; and (ii) organic growth of $5.6 million, representing an average growth rate of 4.1%, from its legacy businesses after excluding NDSD.
These increases were partially offset by (i) a $1.6 million decrease in fresh sandwich sales to the C-store channel resulting from the sale of Retail's fresh sandwich plant in Etobicoke, ON in the fourth quarter of 2012; and (ii) a $1.3 million decrease in NDSD's sales resulting primarily from the restructuring of its convenience store (C-store) distribution network. The restructuring resulted in the conversion of NDSD's customers in certain geographic regions from being serviced by NDSD's direct-to-store delivery trucks to being serviced by third party distributors and wholesale distributors. Correspondingly, in regions where this conversion has occurred the Company now sells its products at a discounted price to the new distributor who in turn sells and distributes the Company's products to C-store retailers.
The low organic growth rate of Retail's legacy businesses, as compared to its targeted growth rate of 6% to 8%, was primarily due to lost sales resulting from temporary capacity issues associated with the transitioning of products from its Richmond deli meats plant to other production facilities (see Restructuring Costs). Normalizing for the lost sales, Retail's organic growth rate was within Retail's targeted range.
Retail's revenue for the first three quarters of 2013 increased by $52.4 million or 11.9% as compared to the first three quarters of 2012 due to: (i) the acquisition of Freybe which accounted for $40.0 million of the increase; and (ii) organic growth of $23.9 million, representing an average growth rate of 6.2%, from its legacy businesses after excluding NDSD.
These increases were partially offset by: (i) a $6.5 million decrease in NDSD's sales resulting from the restructuring of its C-store distribution network as well as general contraction of food sales in the C-store channel in the first two quarters of the year; and (ii) the sale of Retail's fresh sandwich plant in Etobicoke, ON in the fourth quarter of 2012 which resulted in a $5.0 million decrease in fresh sandwich sales to the C-store channel.
Looking forward (see Forward Looking Statements), the Company is not providing growth guidance for the balance of 2013 for its Retail segment due to uncertainties associated with its Richmond plant transition initiative (see Restructuring Costs).
Foodservice's revenue for the third quarter of 2013 as compared to the third quarter of 2012 increased by $11.5 million or 11.9% due to: (i) general organic growth of $7.0 million representing an organic growth rate of 7.6%; (ii) the acquisition of certain businesses from Harbour Marine which accounted for $2.0 million of the increase; and (iii) increased sales in its Worldsource food brokerage business of $2.5 million resulting from improved trading opportunities.
Foodservice's revenue for the first three quarters of 2013 as compared to the first three quarters of 2012 increased by $24.4 million or 8.7% due to: (i) general organic growth of $14.4 million representing an organic growth rate of 5.4%; (ii) the acquisition of certain businesses from Harbour Marine which accounted for $5.8 million of the increase; and (iii) increased sales in its Worldsource food brokerage business of $4.2 million resulting from improved trading opportunities.
Foodservice's organic growth rate for the first three quarters of 2013 was below the Company's long-term target of 6% to 8% due to: (i) a general supply shortage of wild and exotic seafood that impacted the sales of Maximum Seafood and Hub City Fisheries, particularly in the second quarter; and (ii) poorer than normal weather in western Canada in the second quarter which impacted Harlan Fairbanks.
Looking forward (see Forward Looking Statements), for the balance of 2013 the Company expects Foodservice's organic sales growth to be within its long-term targeted range of 6% to 8%.
Gross Profit
Retail's gross profit as a percentage of its revenue (gross margin) for the third quarter of 2013 as compared to the third quarter of 2012 decreased primarily due to: (i) several of Retail's businesses experiencing higher input costs that were the result of a temporary spike in certain protein commodity prices. This factor accounted for nearly half of the decrease in Retail's gross margin in the third quarter; (ii) reduced gross margins on product sales transitioned to third party distributors as part of the restructuring of NDSD's business (see Revenue). Corresponding with this change, and the lost margin associated with it, NDSD has been able to significantly reduce its SG&A (see Selling, General and Administrative Expenses); and (iii) approximately $0.3 million in production inefficiencies at SK Food Group's Reno, NV plant resulting from sub-standard input materials received from a third party supplier. SK Food Group is in the process of attempting to recover these costs from the supplier.
Retail's gross margin for the first three quarters of 2013 as compared to the first three quarters of 2012 decreased due to: (i) the restructuring of NDSD's business as discussed above; (ii) the temporary spike in certain protein commodity prices in the third quarter; (iii) temporary production inefficiencies at SK Food Group's Reno, NV plant in the first quarter of 2013 due to a combination of the launch of new sandwich wraps for two large international customers in the fourth quarter of 2012 and the installation of several new pieces of equipment during the first quarter of 2013; and (iv) approximately $0.3 million in production inefficiencies at SK Food Group's Reno, NV plant in the third quarter resulting from sub-standard input materials received from a third party supplier.
Foodservice's gross margin for the third quarter of 2013 as compared to the third quarter of 2012 decreased primarily due to Maximum Seafood not being able to maintain its historic selling margins as a result of global shortages in certain species of wild and exotic seafood combined with regional consumer price resistance. This decrease was, however, mostly offset by strong margins in Hub City Fisheries that were the result of several factors including a strong pink salmon fishery and its first time participation in a test fishery by the Pacific Salmon Commission.
Foodservice's gross margin for the first three quarters of 2013 as compared to the first three quarters of 2012 decreased due to: (i) poor production efficiencies at Hub City Fisheries in the second quarter resulting from record low sockeye salmon runs and a corresponding shortage of wild fish for processing; and (ii) lower gross margins in Maximum Seafood as discussed above.
Selling, General and Administrative Expenses (SG&A)
Retail's SG&A for the third quarter of 2013 as compared to the third quarter of 2012 as well as for the first three quarters of 2013 as compared to the first three quarters of 2012 increased due to: (i) the acquisition of Freybe; and (ii) increased selling and marketing costs associated with Retail's organic sales growth (see Revenue).
These increases were partially offset by: (i) a significant decrease in NDSD's SG&A as a result of its restructuring (see Gross Profit); and (ii) a $1.2 million gain on the sale of vacant land in Edmonton, AB.
Foodservice's SG&A for the third quarter of 2013 as compared to the third quarter of 2012 as well as for the first three quarters of 2013 as compared to the first three quarters of 2012 increased due to: (i) higher variable selling costs associated with Foodservice's organic sales growth (see Revenue); and (ii) increased costs associated with the development of the infrastructure needed to accelerate the growth of its seafood based initiatives.
Adjusted EBITDA
The Company's adjusted EBITDA for the third quarter of 2013 as compared to the third quarter of 2012 increased by $2.1 million or 10.4% to $21.8 million primarily due to: (i) growth of the Company's sales (see Revenue); (ii) a $1.2 million gain on the sale of vacant land (see Selling, General and Adminisrative Expenses); (iii) the restructuring of the Company's convenience store focused businesses (see Restructuring Costs); and (iv) strong margins in its Hub City Fisheries business (see Gross Profit).
These increases were partially offset by: (i) lower margins in several of the Company's deli meats businesses resulting from a temporary spike in certain commodity prices (see Gross Profit); and (ii) approximately $0.3 million in production inefficiencies at SK Food Group's Reno, NV plant resulting from sub-standard input materials received from a third party supplier (see Gross Profit).
The Company's EBITDA for the quarter was also negatively impacted by lost sales resulting from temporary capacity issues associated with the transitioning of products from its Richmond deli meats plant to other production facilities (see Revenue).
Looking forward (see Forward Looking Statements) the Company expects its adjusted EBITDA to be favourably impacted by the following:
In terms of NDSD, its business has stabilized with its adjusted EBITDA for the third quarter showing an increase as compared to the third quarter of 2012. The Company recognizes, however, that as a result of the continued contraction of food sales in the C-store channel further consolidation is needed of the distribution companies servicing this industry. Correspondingly, the Company has initiated a process to explore strategic alternatives for better servicing the convenience store channel with the goals of improving the efficiency and effectiveness of the distribution system used for our products in this channel and maximizing the value of its NDSD convenience store distribution business.
Due to uncertainties associated with the timing and impact of the items outlined above, the Company is not providing guidance on its projected adjusted EBITDA for 2013.
Depreciation and Amortization (D&A)
The Company's D&A expense for the third quarter of 2013 as compared to the third quarter of 2012 and for the first three quarters of 2013 as compared to the first three quarters of 2012 increased due to: (i) the acquisition of Freybe; and (ii) additional depreciation associated with several major capital projects completed in 2012 and 2013 including Stuyver's new artisan bakery, Deli Chef's new sandwich plant, and Centennial Foodservice's new seafood facility.
Interest
The Company's interest and other financing costs for the third quarter of 2013 as compared to the third quarter of 2012 was relatively stable despite an increase in the Company's funded debt primarily due to: (i) lower cost senior bank debt being used to retire maturing vendor take-back notes and capital leases; and (ii) the refinancing of SJ Irvine.
The Company's interest and other financing costs for the first three quarters of 2013 as compared to the first three quarters of 2012 increased by $0.4 million primarily due to the Company's higher funded debt levels partially offset by the benefits associated with: (i) using lower cost senior bank debt to retire vendor take-back notes and capital leases; and (ii) the refinancing of SJ Irvine.
Restructuring Costs
Restructuring costs consist of costs associated with the significant restructuring of one or more of the Company's businesses. During the first three quarters of 2013 the Company incurred $8.7 million in restructuring costs consisting of:
FREE CASH FLOW
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 6, 2013, 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 and business restructuring initiatives; (xi) risks associated with the Company's business acquisition strategies; (xii) changes in the value of the Canadian dollar relative to the U.S. dollar; and (xiii) 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 2012 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 6, 2013 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: 07.11.2013 - 06:30 Uhr
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